08.21.07
BUYING A HOME IN TODAY’S CREDIT CRISIS
With the collapse of the sub-prime market, mortgage loans are becoming harder and harder to get. One will need a higher credit score, a larger down payment and, unfortunately, one may wait longer.
Because lenders are tightening their belts borrowers will need to do the same to qualify for a loan which many could have received only a few months ago. According to Alison Go with U.S. News and World Report, “the credit crunch has made it harder for sub-prime borrowers – those with credit scores of 620 or lower, on a FICO scale of 300-850 – to get certain loans, especially with no money down.”
All is not lost. Loans with no down payment have been affected the most. Firms are taking a closer look at factors including job security, delinquencies and stable income before deciding on ones credibility. The way to stay in the game is easy –
· Save or Create a Paper Trail – If you are self employed or paid in cash create a paper trail to prove you are a worthy borrower. Two years of documentation is a good rule of thumb.
· Good Credit – If you don’t have it, Get it!
Life happens, and unfortunately sometimes one will fall behind on financial matters. Do what it takes to get on top of and understand your finances. Pay ALL your bills on time for a minimum of 1 year. Don’t carry high balances on your credit cards. Monitor your credit reports and clean them up if necessary.
· Save, Save, Save!
“Many lenders will require a 3-5% down payment for borrowers with a FICO score of less than 660”, says Kevin Miller, president of TexasLending.com. If you will need a down payment, figure out a range of what that will be. (5% of a $250,000 loan would be $14,500) Take that figure and divide that amount by the number of months until you want to purchase a home. ($14,500 divided by 18(months) is $805.55 a month) Save that amount each month to help prepare your self for becoming a homeowner.
