There is no question that the overall economy came undone by questionable lending practices.  So it’s really no surprise that lending guidelines have tightened considerably.  But what makes absolutely no sense is that these stricter guidelines are now seriously punishing responsible and informed real estate investors.

On December 16th, the Fed cut the funds rate from 1% to a target of 0%-0.25%.  This is great news for those with adjustable rate mortgages, as you’ll see your payment go down next year.  This is also an opportunity to refinance your mortgage, depending on certain criteria.  There are incentive programs for new home buyers to acquire a home with no down payment; they need only 3% for closing costs, that’s it!  

The government trotted out the $700 billion TARP at the expense of the American taxpayer to bail out the imploding finance sector. The theory was that the government would acquire the banks’ bad assets and provide some liquidity; the banks would thus be in a position to provide credit for qualified buyers. 

But rather than loosening their lending practices, they are restricting them even more, most particularly for investors.  There have been dramatic changes in the number of properties an investor can have, in LTV requirements, and more.  If I were in charge of the government’s plan to stimulate the economy, I would open the field to qualified investors immediately.  Real estate investors are in a position to make a tremendous positive impact on the overall economy, and putting restrictions on the amount of credit available to this qualified demographic will simply keep things depressed even longer. (Is it better to allow one person to buy one home and take it off the market, or is it better to allow one person to move ten properties off the market?)  But since I’m not in charge of the government, I can only make this recommendation:  Buy now.  Submit a purchase contract.  Take advantage of the lowest interest rate since 1971.  Supplement your earned income with steady passive income.  Do it before credit for investors is choked off completely.

Questions?  Comments?  Contact Us!

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Ofer Goldenberg is the Owner and CEO of Capital Growth Investment.