Getting a Loan in 2009
By Shannon Petrie, FrontDoor.com |
Published: 12/01/2008
Just a few short years ago, getting a home loan was extraordinarily easy. Even with imperfect credit and little to no cash for a down payment, borrowers could qualify for a mortgage with ease.
Fast-forward to today: in the midst of a subprime mortgage crisis and a record number of foreclosures, lending standards have tightened considerably. On the upside, these tightened standards mean that fewer future homeowners will default on their mortgages. On the downside, even well-qualified buyers are now having a hard time getting a loan.
Lending standards are unlikely to loosen in 2009. Borrowers will need impeccable credit, extensive documentation and cash for a down payment in the upcoming year. If you're hoping to buy a home, try these tips for getting your finances in order and making smarter buying decisions.
- Improve your credit score. In the past, 620 was an acceptable credit score, but lenders are now demanding scores of 700 or higher. If your credit is less-than-perfect, you can boost your score by paying down your debt and fixing errors on your credit report. Read the seven surefire ways to improve your credit score.
- Prepare documents to show lenders. No-doc loans are no longer in vogue; lenders now need to see paperwork showing personal, employment and financial information. Read this list of documents you'll need to show your lender.
- Save for a down payment. While buyers used to be able to get away with zero-down loans, many lenders are now requiring down payments of 10 or even 20 percent. Start saving money for a down payment now, or try these creative tips for scraping the cash together.
- Figure out what you can afford. Homeowners who lived outside their means and purchased houses they couldn't afford were a huge contributor to the current foreclosure crisis. Be honest about how much house you can really afford: tally your other expenses accurately, and take this figure into account when determining how large a mortgage payment you can afford.
- Read the fine print on your mortgage. Another contributor to the current mortgage crisis was the fact that people did not understand how adjustable rate mortgages worked. Learn about the different types of mortgages to decide which one is right for you.
- Look into alternative mortgage options. If you just don't have what it takes to qualify for a conventional mortgage, don't give up. While subprime mortgages are no longer an option, alternative sources for funding are out there.
- Continued market adjustments
- Action from the Obama administration
- More assistance programs for homeowners in danger of foreclosure
- Some calm to the chaos of the banks' restructuring
- Thorough reviews of mortgage applications
- Low prices and low interest rates
- Cool tech tricks and tools for the real estate obsessed
- Wiser consumers
- Leaner, greener homebuying
- An increase in consumer confidence
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