With Mortgage Loan Crunch, Location Certainly Matters

You’ve surely heard about how the credit crunch has made it harder for many types of buyers to afford a home or qualify for a mortgage.

• First-time buyers.
• Those moving up to larger homes.
• Buyers with marred credit or little cash for down payments.
• Those in pricey areas who need jumbo mortgage loans exceeding $417,000.

“If you’re going to get a loan today, in comparison to six months ago, you’ll have to bring more money down, better documentation and better credit characteristics to get the same terms,” says Doug Duncan, chief economist of the Mortgage Bankers Association.

But here’s what you might not realize: This home mortgage impact isn’t the same everywhere. It all depends on where you live.

A crackdown on bad credit home loan products - higher-rate loans to buyers with poor credit - is hitting people especially hard in Riverside, Calif., and Miami, for example, where buyers rely heavily on such products.

In those cities, about one-in-five outstanding home loans are subprime, compared with one in nearly seven loans nationwide.

Meanwhile, buyers with jumbo loans are getting slammed with higher rates. In costly areas - think New York, Los Angeles, San Francisco - many buyers with such loans are suffering.

In the six weeks that ended September 5, the average jumbo mortgage rate rose to 7.38 percent from 7.03 percent, even as rates on home loans below $417,000 fell to 6.5 percent from 6.75 percent, Bankrate.com says.

Nationally, jumbo mortgage rates fell to 7.2 percent last week.

The credit crunch is likely to wreak most havoc in California, Nevada, Florida, Hawaii, Arizona and New York, because relatively high home prices there have led many buyers to subprime, no-doc loans or jumbo loans, says Thomas Lawler of Lawler Economic & Housing Consulting.

But in lower-cost areas such as Des Moines; Lincoln, Neb.; Sioux Falls, S.D.; and Bismarck, N.D., the mood is, “What credit crunch?”

Indeed, North Dakota and South Dakota mortgage applicants, with far less exposure to such loans to begin with, are barely feeling the pinch of stricter lending rules, according to Lawler’s Mortgage Index of Pain.

The index is based on the idea that the more a state’s residents rely on so-called non-traditional loans - and to a lesser extent, jumbo loans - the more severe its likely fall in sales and prices.

Not many folks in Sioux Falls (median price: $142,300), for example, need jumbo or no-down-payment loans. Only 1 percent of loans there are jumbos.

Follow this link to read the Courier-Post’s report on how the credit crunch is affecting buyers in metro areas across the U.S.: