Lenders doing extra tightening of loan requirements in areas where prices dropping.

As mortgage deliquency rates have risen (up to 3.3% in third quarter of the year) lenders have become more and more skittish. Having already tightened up their general requirements, lenders are now setting special requirements for housing markets where house prices have been dropping rapidly (such as Florida, Detroit and California). If you live in one of these areas, you may have to overcome special hurdles to get a mortgage.

For example, many lenders now refuse to lend more than 85% of a house’s value in these areas. With values dropping, this makes refinancing a real problem. Let’ s say you have a house that you bought with a $196,000 mortgage, putting only $4,000 down. Now, five years later, you want to refinance. The house is now valued at $190,000 and the refi lender is willing to give you only 85% of that, or $161,000, not enough to pay off the balance on the old mortgage.

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