The proposed $700 billion bailout that the U.S. House did not pass Monday would have absorbed bad mortgages weighing down banks. Concerns over those bad debts have made credit tighter and more expensive for businesses and consumers. NewsChannel 11 found one Lubbock homeowner who felt the effects of those debts, even before the market took its dramatic downfall.
Roman Valencia is currently a proud homeowner, but just a few months back, instability in the lending world threw his home buying hopes into a stall. "Everyone was happy; I was happy. It appeared I was going to move in here at the very end of July, and then literally 24 hours before closing, my mortgage broker told me that the lender had bailed at the last moment," Valencia said.
Valencia and his broker searched for other lenders, but with a housing slump across the country, and mortgages going into melt down, the game changed. "Lenders that would previously, literally weeks prior, would have accepted me based on my credit score were now saying they would no longer accept me. They had changed their credit guidelines," Valencia said.
That left Valencia in limbo. He'd already given up his rental and had no place to go. "I mean, it really is frightening," Valencia said.
Fortunately, Valencia and his broker were able to find a solution, allowing him to become a proud home owner. "Wait it out; I mean that's the only advice I can give is wait it out. And then if you do decide that you're going to purchase a home, absolutely have at least one to two back-ups as to what you will do if the purchase falls through at the last moment," Valencia said.
Valencia says he got a fixed rate mortgage, which is what most financial advisors say folks should get. Many analysts say the adjustable rates are part of the reason home mortgages began to fail.
Tuesday, stock prices recovered after Monday's record 777 point drop, but it's still down substantially for the year. Local financial experts provide some perspective on the severity of Monday's market drop.