How Hard is it to get a Home Loan Now?
You may have heard rumors about all the mortgage changes going on in 2014 when it comes to buying a house and applying for a mortgage, (or refinancing for that matter), but how hard it is really going to be?
You shouldn’t stress too much about applying for a home loan but understand the reasons behind it. In 2004- 2007 lenders were loaning money like water without the concern if people could really pay it back or not. That’s what has gotten us into the mess we have been dealing with for the last 5 years.
Well now, since the economy is a little more back on track and housing is going in the upwards direction, more and more short sales and foreclosures are trickling off the market and lenders are being much more careful as to whom they loan money to and how much. This really should be a good thing, if you think about it. By being even more careful we are not setting ourselves up for failure and foreclosure down the line. The more qualified an applicant is, the better they will pay the mortgage and hang onto the property.
What we do know is that lenders have already been stricter as to whom they loan money to and the stipulations behind it. The credit score requirements have gone up and the debt to income ratio has gone down.
On average, the debt to income ration is now 43%, however, this only applies
to some lenders as GSE-eligible qualified mortgages backed by Fannie Mae and Freddie Mac may approve any loan that meets the requirements and is eligible for purchase, guarantee or insurance by FHA, VA or USDA regardless of the debt to income ratio.
If an applicant meets the requirements set forth for these other types of loans other than a conventional, they may not fall under the current 43% debt to income ration.
But, that doesn’t mean that they are handing out loans willy-nilly. They still are being very strict on requirements, income and credit history and this is why it pays to have as much “good” information as possible. If your credit history has more red flags than a British soccer game, you may need to get that in order before applying. Have all your documents ready to go such as W-2s, bank statements, pay stubs, tax returns, savings and investments statements, blood test and first born… ok maybe not those last two but you get my point. If you don’t have all your finances in order plus a decent chunk in the bank, you may be denied.
I want you to be prepared for a home and not just the home loan. The mortgage payment is more than just repaying the debt; it includes taxes, insurance, interest and the general maintenance of owning a home. Being prepared means you won’t be seeing yourself in a foreclosure or short sale predicament anytime soon.
Call me today for connections to local lenders and to get the ball rolling.