Home Prices Are Right, But Can You Get A Loan?

Home Prices Are Right, But Can You Get A Loan

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Are Lenders Being Unreasonable?

It may seem that lenders are being unreasonably stringent when you compare today's requirements to what lenders demanded during the peak of the housing bubble. I heard one Realtor boast back in 2006 that he could qualify a lizard. That is certainly not the case today. However, if you compare what lenders are requiring from borrowers to what they required before the housing bubble, they do not look so harsh. Could it be that lenders have simply returned to pre-bubble standards?

Is 5% to 10% Down Unreasonable?

During the housing bubble it was not unusual for buyers to get 100% financing on the home they purchased. However, years ago homebuyers were expected to put down 20% on a conventional loan. VA and FHA loans were a lot easier to handle but harder to get in many southern California areas due to the high home prices. Now, in today's world, a prospective homebuyer should figure on a 5% or a 10% down payment. The days of 100% financing are over, at least for now.

Is Your Credit Good?

Lenders want proof today: proof of a job and proof of good financial status. This means that if you want to get a home loan today, you had better clean up your credit score if it has slipped below 700. A good credit score is not the only criteria but it is one of the most important factors that lenders look at before granting a home loan. So, check your credit score and clean up any problems.

The New Reality

All in all the new approach to lending may frustrate many consumers who are anxious to buy a home and Realtors who are anxious to sell it, but may be a good thing after all. After all, it is not a good thing when thousands of people lose their homes and end up with bad credit. When 100% financing loans and ARMs were freely available, families bought homes they really could not afford. ARMs or adjustable Rate Mortgages may still be available but should not be used by everyone. Many of today's home foreclosures have occurred and will continue to occur because when the adjustable rate mortgage resets, the payments suddenly become unaffordable. An investor who buys a property planning to flip it within a year is a likely prospect for an ARM, but a family hoping that a year from now their income will increase may not be a good prospect for that type of loan.

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