Wednesday, September 12, 2007

Refinance or New Purchase: What You Need Today to Get a Good Loan

Mortgage rates have fallen with the expectation that the Federal Reserve will lower the federal funds rate when they meet on September 18th. This has increased the number of applicants looking to refinance and apply for new purchase loans. Rates are good, but qualifying for the best rate is more difficult during the current mortgage crunch. Banks are understandably a bit shell shocked from the recent melt-down in the sub-prime market. This will result in a pendulum effect and a conservative approach to evaluating borrowers. Proceeding with caution is a good thing. Let's learn from past mistakes and move forward. For those looking to take advantage of the good rates, here is what it takes to impress a lender:
  • A Good FICO Score. Improve yours today with simple tips from our past post: Fix Your Credit...

  • A Sizable Down Payment. Most loans now require at least 10 percent down, and lenders prefer 20 percent down.

  • A Reputable Mortgage Broker. A good lender can increase your odds. Walking into your local bank branch may seem like an obvious approach to securing a home loan. However, your bank will have limited products available at any given time. Conversely, a good mortgage broker can shop your assets through multiple sources and help find the best program available for your situation. Reputation is important because you don't want to be disappointed if promises are not kept. Call your real estate agent for a reliable recommendation.

  • Verifiable Income. Lenders would like to see at least two years of documented income. Self-employed individuals can still get financing, but rates may be higher.

  • Patience. As banks take a more critical look at their borrowers, it may take longer for approval. Gather all the paperwork, and then realize that you may have to wait.
  • A Backup Plan. Some well-qualified buyers were disappointed recently when their lender unexpectedly pulled the plug.
  • A Dependable Real Estate Agent. A good real estate agent can help coordinate the pieces and keep your escrow on track.
Research source for this article: Dow Jones Business News (09/03/07)

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