The house in the above picture, located in Seattle is ‘worth $1 million’, and its owner wants to borrow the money to buy another property nearby, valued at just over half that. They have a perfect payment record and a good job. And yet their mortgage application has been refused, because the mortgage company requires a percentage cash downpayment, and is not prepared to lend without that.
The sub-prime mortgage crisis was created by the making available of nil-deposit 100% mortgages, from which millions of Americans are now walking away. The only way to borrow now is to have a cash deposit regardless of a borrower’s circumstances, as lenders have found that even a small cash deposit prevents borrowers from walking away once things get tough and the price of property falls.
Americans are not used to saving cash as this story illustrates.
I live in the Magnolia area of Seattle, WA. I have owned a beautiful view home here for 9 years. I’ve included some photos.
A couple of years ago Bank of America appraised it at $1M.
I put an offer on a condo about 3 blocks from my home in the beginning of April. The price is $585K. Because of recent foot surgery, I urgently need a one floor living space, instead of the 3 floor design of my current home.
Since April, I have been trying to get financing so that I can complete the purchase. It is June 12, and I am still waiting.
I have prefect credit scores, never had a late payment of any kind and an excellent income. The problem is: the down payment!
It seems, because of this mortgage mess, borrowing against my own property is OUT OF THE QUESTION.
The large banks, especially Bank of America, has deemed that my house is no longer worth $1M, and as my banker said “the value is going down weekly according to Zillow”– leaving me with no down-payment.
I qualify for just about any mortgage–except that I do not have the down payment.
I am so upset and worn out trying to make this purchase work, I am exhausted! It seems that my hard work over the years of a perfect payment record, excellent credit, wise investing and a good job have not helped me a bit.
On 6/7/08, on the front page of both newspapers in Seattle were articles about this very thing. Banks and mortgage companies are so busy with their sub-prime messes that they are ignoring the good credit risks.
I’m in real danger of losing this condo if something doesn’t break soon–and that would be a real tragedy for me.
Welcome to tragedy American-style, having to have cash!
Property prices can only fall further, it seems, until Americans see that bargains are so good that they decide that saving some cash has gotta be a good idea. Consumption will have to fall a bit too, I guess, while Ann and her friends save a few thousand dollars. She could always sell her $1 million home, but maybe she doesn’t want to be faced with the fact that it’s only worth $775,000 now, and next year might be only $650,000.
The condo will be down to $425,000 by then so it’s all relative. She’ll work it out, but such stories are what recessions are made of. Read the overview across America from Reuters June 11th HERE