5 HURDLES FOR HOME FINANCING
You have no doubt noticed how difficult it is to get approved for a new mortgage these days and you are not imagining it. The number of mortgage applications that get approved is probably 3 out of ten, where as in the past boom years it was 9 out of 10 and the normal ratio is 5 or 6 out of 10. Underwriting standards have tightened, meaning buyers need high credit scores and more income with a higher down payment. There are many obstacles in financing a home but the following 5 are problematic.
1. Higher credit score requirements – To get the best deal you better have top-notch credit scores.
2. Greater scrutiny of income and assets – Previously banks were relaxed on verifying income and deposits, not anymore. Homebuyers need to be ready to prove anything that may remotely look funny. Qualified buyers are even put through the wringer and often turned down because of the appraisal issue, property issues or anything that looks strange, even if they buyer can prove they can pay cash for the property.
3. Ever-changing borrower requirements – It used to be that anyone with decent credit could get a loan for any size home, now it is critical to have a credit score above 700, debt ratios below 36%, a minimum of 20% down, and good stable employment. Even with all this the guidelines could still change.
4. Appraisals are coming in low – Due to the large amount of short sales and bank owned sales, homes are not appraising for the contract price. Part of the problem is appraisers may be inexperienced and unfamiliar with the neighborhood which results in inaccurate appraisals and unnecessarily rejected loan applications.
5. Condo purchases face additional tests – Condo loans are much tougher these days, because the condo building has to be approved in addition to the buyer. They are documenting cash reserves, owner occupancy ratios, low delinquency rates on monthly assessments and more.
If one can manage through all the hoops and take advantage of the low interest rates and home prices we should see fewer foreclosures in the years ahead.
* This information was taken from an article on msn.com/realestate.
