San Diego Real Estate Foreclosures Bargain, But Loan Requirements High!

That sometimes means longer escrow periods, he added. “Instead of a quick 30-day escrow, they are taking 45 to 60 days.”

Burned in last year’s subprime mortgage market meltdown, lenders have abandoned the risky lending practices that allowed borrowers to qualify for loans after prices had soared beyond their means.

Many borrowers took out negative-amortization, deferred-interest loans because of their low, introductory “teaser” rates, said Tom Borcich, a state director for the California Association of Mortgage Brokers. When interest rates adjusted upward after several years, monthly mortgage payments

“Let’s say you were to make a $500,000 purchase two to three years ago with a 1 percent negative amortizing loan,” he said. “The payment would start at $1,608. Take the same loan today with rates up to about 6.5 percent on a 30-year-fixed loan. The payment today is $3,160.”

To get home loans today, consumers need to have “skin in the game,” said Ed Smith Jr., chairman of government affairs and industry relations for the association of mortgage brokers. That means making down payments they stand to lose if they allow their homes to fall into foreclosure.

Consumers can get fixed-rate “conforming” loans – the kind that are sold by lenders to Fannie Mae and Freddie Mac – for as little as 5 percent down. Mortgage insurance companies generally require a down payment of 10 percent on condominiums, however.

“With 20 percent down, you don’t have to pay private mortgage insurance,” said Dave McDonald,” president of the San Diego Chapter of the mortgage brokers group. “You don’t have to pay the fees that lenders are charging for loan-to-values of higher than 80 percent.”