Buyer Tips, Featured, Featured Post, Financing, Foreclosure

Home Financing Challenges

You hear the dismal news everyday, lenders are in not lending, home values are falling, foreclosures are at an all time high and you may wonder how the mortgage crisis affects you.

Record low interest ratesare getting alot of  attention and many potential homebuyers are wanting to know, is now the time to buy a new home?  It could be if you have stellar credit, steady income and don’t mind playing by ever changing rules. One of the biggest impacts that the mortgage meltdown has caused is that underwriting standards are tighter than ever before, leaving many people out of luck when trying to get approved for a home loan. Here are today’s top challenges for home buyers:

1. Credit Score – Defaults and foreclosures have caused lenders to raise the bar on acceptable credit scores. Want those ultra low interest rates? You have to have nearly perfect credit to qualify. In fact, just get approved for a home loan, you’ll need a score well above 600, and if you want to avoid higher rates and your score should be above 700.
2. Income Requirements – The rules of engagement for income and proof of income has changed a lot. Your mortgage application will be checked and verified multiple times. Previous “liar loans” or no documentation loans are now illegal, which hurts the self employed. You may be turned down for any number of things that look strange or can’t be verified on your application, even if you are purchasing with a good bit of cash.
3. Changing Guidelines  - OK – you have credit scores above 700, debt to income below 36% and at least 20% down. You have been employed by the telephone company for 10 years. You’re set, right? Not so fast. Both far reaching regulations and nervous individual lenders keep changing the rules for qualifiers. You may have to jump through many hopes to get your loan approved, even if you look great on paper.
4. Low Appraisals - Short sales and foreclosures may put some bargains on the market, but they also impact the value of other homes in the neighborhood or community. Houses are not appraising for the contract price, slowing or stopping the application process. Inexperienced appraisers also hurt the appraisal process.
5. Condo Approvals – Finally, the condo and townhome market has been hurt by increased regulations, with lenders taking not only the individual buyer into consideration but also the status of the condo building ownership – documenting cash reserves, occupancy and delinquency rates of other occupants. 

It may be tougher than ever to get a home loan, and only time and some success stories will relax the current standards. Hopefully, the strict guidelines will help the overall market long term by slowing foreclosures and delinquent loans.  Do you have a success story or have you experienced challenges with obtaining financing? We would love to hear your comments!

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