If consumers these days believed everything they read in the newspaper or saw on the evening news, they might think that obtaining a mortgage to buy a new home has become pretty much a lost cause.

The reality is something quite different. While it’s definitely true that mortgage lending standards have tightened for some borrowers, all mortgages are not created the same and the majority of those in the market for new homes in Charlotte NC will find that conditions have remained much the same as they’ve ever been. And mortgage interest rates generally remain highly affordable.

The trouble in the market started early this year with reports that many sub-prime borrowers with adjustable-rate loans were experiencing difficulties making their monthly payments when the initial phase of those loans ended and the interest rate was adjusted upward.

Sub-prime borrowers are those with less than perfect credit histories, and it’s important to remember that families who find themselves in this category deserve the opportunity to become home owners. The sub-prime market, for instance, can be a big help to first-time buyers who haven’t accumulated the financial wherewithal to qualify for a conventional “prime” mortgage.

But it’s worth looking at some of the excesses that occurred at the height of the recent housing boom, and ask whether many of these lending practices should have been allowed to occur in the first place. With housing prices surging at a record pace year after year, some lenders became lax and didn’t look as closely as they should have at the ability of the borrower to repay the loan.

Fast-growing equity in the home would save the day for those facing a big monthly payment increase when their adjustable-rate loan was reset at a higher interest rate and allow them to go to the lender and refinance into a favorable fixed-rate loan. However, the boom inevitably started to wind down, the supply of available homes soon exceeded demand, and prices softened, turning down in many areas.

Those who bought new homes in Charlotte NC toward the end of the growth period when prices were at their peak started finding out that it was no longer as easy to extricate themselves from their financial plight if they were not able to afford the higher payments. Many had purchased their home without a down payment, so they had little, if any, equity in their home. To make matters worse, many lenders made mortgages that didn’t document the income of the borrower, and borrowers tended to exaggerate their income to qualify for the loan.

Needless to say, when lenders saw a sharp rise in problem sub-prime loans, they cracked down quickly on the earlier practices that created the situation. The pendulum has swung too far, but for the time being sub-prime loans can be hard to get. Buyers who would have relied on sub-prime financing are now looking at FHA or VA loans backed by the government, a segment of the mortgage market that remains unscathed. Candidates for the sub-prime market may also find that they can qualify for a loan in the conventional prime market if they have good credit and cash for a down payment.

Today, the conventional, conforming mortgage market is functioning well, and ideally, this is where many prospective home buyers want to be. The loans are limited to $417,000, making them eligible to be purchased by Fannie Mae and Freddie Mac. Lenders are only too happy to make these loans to credit-worthy borrowers who have the financial resources that have traditionally been required to qualify for a mortgage.

Borrowers in high-priced areas will also find greater difficulty in finding the amount of financing they need because the credit crunch has grown to include so-called jumbo loans, which exceed the amount allowed for purchases by Fannie and Freddie. But even in this market, there are lenders who will work with buyers to provide the financing they need, albeit at interest rates that are somewhat higher than normal.

Home builders today are in the process of working down their inventories of unsold homes in a market that definitely favors the buyer. They have a good supply of product in a range of prices and they are offering a variety of incentives designed to sell homes. Just as importantly, they are a good source of support for prospective buyers who are concerned about financing their purchase.

Even in the midst of the housing downturn for new homes in Charlotte NC, large numbers of consumers are finding the homes they are looking for and the mortgage finance they need to complete the purchase. In an economy that continues to grow, create jobs and increase household income, buying a new home is not an impossible dream. Consumers who go out and look for themselves at what the market has to offer may be surprised by what they find.

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