Mortgage Market Working For Many Americans

Even in the midst of the worst housing slump in decades, some people are out there getting mortgages and buying homes. But they're paying more for mortgages these days, and borrowers with shaky credit won't find it easy to get a loan.

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With all the focus on the trouble in the housing market, you may be wondering if it's almost impossible to get a mortgage. We've been just talking about Fannie Mae and Freddie Mac, plus interest rates are inching higher. But for all the problems, the mortgage market is still working quite well for the vast majority of Americans. NPR's Chris Arnold Reports from Boston.

CHRIS ARNOLD: Thirty-six-year-old Scott Abrams is a first-time homebuyer - or he almost is. He's standing in front of a condo he and his fiancee are in the process of buying in Belmont. It's a nice suburb right outside Boston.

Mr. SCOTT ABRAMS (Web Developer): Her reaction was immediate. She was like, I love this place. There's a park, I mean, literally, right around that corner -a soccer field, basketball courts, playground.

ARNOLD: Abrams is a Web developer. His fiancee's a teacher. And when the couple went to get a loan last week, they got a bit of a surprise. When they started looking at houses back six months ago, rates on 30-year fixed loans were under six percent, but they've been rising. And by the time Abrams locked in a rate last week, the best he could get was 6.5 percent.

Mr. ABRAMS: It's been going up and up and up and up. And this week, it's like 6.85. I'm like - I didn't expect to pay this much, 6.5.

ARNOLD: But Abrams thinks they're getting a good deal on the condo, $290,000 for a nice two-bedroom place. He never could have done that a few years ago. A half-a-percentage-point rate jump will mean about $80 more a month on the mortgage, but Abrams is getting married, thinking about kids, and he wants a place that's a little nicer than his rental apartment.

Mr. ABRAMS: It's kind of some meatheads that live sort of underneath me. They're not bad people, but they're in their 20s. They treat it like a dorm. Like, you get tired sometimes, you know, of loud music. I need something a little more respectable.

ARNOLD: And that's the thing about the housing market. People want to buy houses. And in many places, prices have fallen enough that they're looking better to buyers, and that's ultimately going to be a bigger deal than vague uncertainties over trouble in the banking system or interest rates rising a little bit.

Recently, the number of homes being sold around the country has stopped dropping every month. It's stabilizing, and that's a good sign.

Mr. PAUL VAN WART (Mortgage Broker): Did anyone get chased wholesale today?

Mr. ABRAMS: Yeah, I'm going to send this to you right now, Paul.

ARNOLD: A couple of towns over, Abrams' mortgage broker, Paul Van Wart, is getting interest rate quotes for customers.

Mr. VAN WART: Well, I have not heard of one person say I'm not going to buy the house because I can only get 6.75 or 6.875.

ARNOLD: Van Wart says the bottom line is that prices are down, and most people can still qualify for loans on pretty good terms.

Mr. VAN WART: There's great financing available, you know. FHA is strong. Fannie Mae and Freddie Mac, Veterans Administration. But, I mean, these are great rates. Anything under seven percent is a great interest rate.

ARNOLD: Van Wart says for people with good credit, there are still even some zero-money-down first-time homebuyer programs. Still, if you don't have good credit or a steady job, pretty much nobody will give you a mortgage these days. Van Wart says that's a good thing. He says all those loans that didn't require you to prove your income with a W-2 are pretty much gone, but he says that is hurting some people who really can afford a mortgage - take, say, carpenters or contractors who make a lot more than they show on their taxes.

Mr. VAN WART: The people that are having trouble getting financing right now are, you know, self-employed borrowers, okay, that don't show a lot of their income. And that's unfortunately the collateral damage when you just kind of take a loan product off of the shelf.

ARNOLD: Van Wart thinks about 10 percent of his clients fall into the self-employed category and are having some trouble, but overall, he says, the mortgage machinery is humming along just fine. There is one other big thing, though, keeping more buyers from jumping in. They're worried they'll buy too early and prices will keep falling. Chip Case is a housing economist at Wellesley College.

Professor CHIP CASE (Housing Economist, Wellesley College): If you're buying a big asset and you expect it to fall in value, it's not something you want to buy.

ARNOLD: Case says there are still just too many homes for sale, and it's basic supply and demand. Too much supply keeps pushing prices down. He says that's why these efforts to avoid unnecessary foreclosures are so important. Keeping more of those homes off the market will help it recover sooner. Chris Arnold, NPR News, Boston.

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