Getting Qualified in Today's Mortgage Market

Posted by on Friday, November 21st, 2008 at 11:12am.

Home mortgages have gotten a lot of attention in the news during the past few weeks. As home buyers keep hearing about how lenders are tightening the loans they give out, many people are wondering if they’ll now be able to get the home they could have easily bought months ago. I’ve included in this article one of the most common questions we’ve gotten from home buyers in the past few weeks: is it harder to qualify now than it was 3 months ago before the mortgage crunch? 
The short answer to this question is that it’s gotten more difficult for lenders to qualify borrowers who have limited down payments. A borrower now needs a clean credit and a few months’ of reserves in the bank in order to get qualified. Borrowers also now have to make a minimum of a 3% down payment unless they are VA eligible. 
In terms of qualifying, lenders are having to go back to old school methods of qualifying. All lenders (regardless of the company) will require a 2 year history of income, which is a larger time frame than what we were seeing even six months ago. And, lenders are having to be conservative in how they calculate a borrower’s income. 
For example, some borrowers who work overtime count that overpay as their regular income. Even if a borrower can show that he has a history of regular overtime pay (say 6 months or so), the lender may not be able to technically count that overtime income anymore in the regular income. So across the board, you’ll find stricter guidelines for borrowers. 
However, it’s important to note that even with these stricter guidelines, the changes should not affect most buyers. These guidelines are really only affecting borrowers with a damaged credit history. It’s gotten a lot harder for them to qualify in the past few months.
But, if you’ve a done good job of maintaining credit and have saved up some money, you should not have any more trouble qualifying now compared to several months ago. So, it completely depends on your current financial situation. 
If you’re considering buying a home in the next few months, it’s a good idea to talk with a home loan consultant. Don’t think that several months out is too early to meet with a consultant. One of the biggest problems we see with buyers is that look at homes (either in person or on the internet) and don’t really know how much they can afford. There’s no point in getting your hopes up for a home or a price range of homes that you love but can’t afford. So, before you start visiting homes, it’s a good idea to talk with a lender about down payments and monthly mortgage payments so you can have a definite price range in mind.

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