Hope for Home Buyers
This is from a newsletter provided by my colleague Norm Maser of Acceptance Mortgage:
Hope for Home Buyers
As lenders are forced to tighten lending requirements, many homeowners and home buyers are starting to feel the pinch and are becoming concerned about the remaining opportunities to get an affordable loan with a reasonable interest rate. But even though investors are still shy about purchasing securities backed by U.S. mortgage, the situation is already beginning to improve.
In recent weeks, the government has taken action to pick up the pieces of the housing market crash by providing extra liquidity, making more money available to lenders and lowering the discount rate that it charges for direct loans to banks. Congress is also in the midst of considering two bills that will modernize the FHA. If the bills are passed, FHA will provide an alternative to subprime lending for some borrowers.
In order to ensure you obtain the best loan possible, it is important to take a good look at the factors that go into your loan approval. Below are a few factors that lenders are taking a close look at to make sure you are truly financially ready to take on a new home mortgage:
Tips to Meeting the Tighter Lending Requirements
Job Stability
Lenders want to see a two year employment history on your application. If you have been with the same employer for two consecutive years or more, or you have changed jobs but received an advancement or increase in income, you have a greater chance of receiving a loan at a desirable rate. Frequent job changes, or a gap in your employment history, might hinder your chances of obtaining a loan.
Income
Lenders are becoming more strict about the providing documentation to support your income. Along with job history, lenders ask you to document your last two years earning via tax returns, W-2's and recent pay stubs. If you have non-guaranteed or irregular sources of income, such as commission income or self-employed income, the lender will review it more closely to be sure they qualify you using an income figure tha represents your stable and recurring income. 'No-income qualification' loans are not as prevalent as in recent years, but are still available for many borrowers with higher credit scores.
Down Payment
Fewer zero down payment financing options are available, and those remaining are more difficult to qualify for. Even so, if you have good income and credit but haven't saved any money for a down payment, zero-down financing may still be the best option for you. But more and more borrowers today will need a 3% to 5% down payment to qualify for a mortgage.
Reserves
The money left in the bank once you've obtained your loan and purchased your property is called reserves. Reserves assure the lender that you have the financial strength to make your future mortgage payments pay future mortgage payments. In order to qualify for most loans, you must have at least two to six months of reserves (enough to make your mortgage payments for two to six months).
Credit History
A good credit history is of the utmost importance to lenders, especially during this time of subprime lending foreclosures. If you can work on your credit rating before applying for a mortgage loan, the better chances you have of getting approved and getting better rates. But don't make assumptions about the status of your credit record, ofr if it is 'good eough' to qualify your for a mortgage. Order your free annual credit report from each of the three national credit bureaus, Experian, Equifax and Trans Union, at www.myannualreport.com . Your lender can then review your credit record with you, and determine whether it is acceptable to qualify for the mortgage financing you are seeking. Acceptance Mortgage offers free credit reviews and credit repair assistance and guidance to it's mortgage clients.
Keeping you informed.
Keeping you up to date on the latest housing market news and making sure you receive the best mortgage options and rates is our commitment to you. Call us today at (425) 803-3979, to obtain custom loan options that will fit your current financial situation and help you obtain your ownership goals.