GETTING A MORTGAGE IN TODAY’S MARKET
There are 3 requirements to getting a mortgage:
1. Solid Credit. Prospective borrowers will need a FICO (Fair Isaac Corporation) score of roughly 720 or above to obtain the most favorable mortgage rates.
2. A Down Payment. Nearly all lenders will want borrowers to make some form of down payment to qualify for a loan. The size of the down payment will vary but will be at least 3.5 percent.
3. Income Documentation. Loan applicants will also be required in most cases to provide document verification of their income and their assets.
What can you do?
1. Shop Around. Because the credit crisis has affected different banks in different ways, the streams of credit available in today's market are extremely divergent.
Direct lenders have money to lend. They make the final decision on your application.
Brokers are intermediaries who, like you, have many lenders from which to choose. Lenders have a limited number of in-house loans available. Brokers can shop many lenders for each lenders' store of loans. If you have special financing needs and can't find a lender to suit them, an experienced broker may be able to ferret out the loan you need.
Mortgage brokers, however, are paid with a slice of the amount you borrow, some more than others some less. Internet brokers today perhaps receive the smallest cut, sometimes none at all, and can prove to be a real bargain.
2. Save for a Down Payment. Given the current credit environment, consumers will have to put their financial house in order before they buy a real house. That means if you don't have enough cash for a down payment, you'll have to start saving for one. Borrow the down payment from your retirement plan. Sell some of your investments. Borrow from your parents. Get a second job and save that income.
3. Check Your Credit Report. It's important to make sure that your credit report—which lenders will be using to determine whether or not to give you a loan—is accurate. If you see any mistakes, take care of those inaccuracies.
4. Pay Down Debts. If you want to get a mortgage but have substantial debts, consider paying them down. Lenders are always more willing to work with you the lower your debt load is against your income, because you are not overleveraged.
5. Been Late? Wait. If you have a recent delinquency on your credit report, you're probably better off waiting a couple of months before applying for a loan. If you have a recent blemish on your report, it maybe beneficial for you to wait a few months, maybe even six months or a year; to get that stuff further back in your credit history, this will increase your chances of qualifying for a better rate.
6. Get Someone to Get the Mortgage for You.
If your credit is so low that no one will agree to financing you, see if you can convince
someone with better credit -- perhaps a family member or spouse -- to take out a mortgage for you. Obviously, this can have serious consequences on any relationship, so be sure that the person you ask is someone very close to you -- someone whom you can trust to handle it.
