Are you thinking about buying a new home, but think that mortgages are not available?
Would you refinance your home, but you don't think you can qualify?
Have you assumed that the mortgage crisis has made mortgages unattainable for anyone but the rich?
If this is what you are thinking, you are wrong.
Yes, there is an economic crisis brought on by many problem mortgages and assorted other financial problems that stem from problem mortgages. But, people are still buying and selling homes, and there is still money available for just about anyone who wants to get a mortgage to buy or refinance a home. There is money available, and interest rates are very good - as I write this, my company has rates below 6.00%.
Lending policies have tightened, and some of the loan programs that were 'hot and happening' a year ago are gone, but if you meet some reasonable criteria, you can still get a mortgage.
Before I go into the required qualifications for a mortgage, I will go over those programs that are gone (and good riddance to many of them).
- 100% financing? Gone, unless you are a qualified US military veteran
- "80/20" loans, where you take 2 loans to get 100% financing? Gone.
- Stated Income and stated income/stated assets loans, where you just tell the Lender how much you make and how much you have without proving it? Gone, and good riddance. These type of loans are called 'liar loans' in the industry for a good reason.
- Sub-prime loans, for deadbeats with really crappy credit and no money. Gone.
- Mortgages for anyone who can walk in the door and sign their name? Gone, gone, gone, hopefully never to return.
So, what does it take to get a mortgage? Read on and I will tell you.
- You need some money. You have to have enough to make at least a down payment of 3%, pay 2-3% in closing costs, and have at least 3 months of mortgage payments in reserve. These assets can be in cash, bank accounts, savings, stocks & bonds, brokerage accounts, IRA, 401Ks, etc. You can use a gift from family to cover much of the funds needed up front, but you still need to have saved some money somewhere. And you have to able to prove you have these assets.
- You need a job. Or some form of income, enough to cover the mortgage payment and your other debts. You also need to have been in your job, or at least the same industry, for at least 2 years. There are some ways to get around this, but not many and it is not easy. And you need to be able to prove you income - with paycheck stubs, tax returns, etc.
- You need decent credit. Notice I did not say great credit, just decent. Credit scores range from 400 to 850, and you can probably get a mortgage if your score is 580 or so. Obviously, the higher the score the better. The lower your score, the higher the interest rate you will get. But we are not talking about loan shark or credit card company rates (is there any real difference between a loan shark and a credit card company?). If the best rate is 6.00%, a low score may require that you pay 6.50% or so.
- You cannot have a lot of other debt. Mortgage Lenders look at something called a 'debt-to-income ratio', which is the percentage of your gross monthly income (income before any deductions) that goes toward long-term debt (mortgages, car and other consumer loans, student loans, and the minimum required credit card payments).
- You cannot have a recent bankruptcy and/or judgment on your credit report. It needs to be at least 2 years since a bankruptcy was released, and you will need to have paid off or otherwise taken care of any judgment or liens against you.
- You need to reasonable. Just because you love that 4000 square foot house and some dishonest mortgage guy is telling you he can get you a loan for it does not mean you should buy it. This is one of the biggest reasons we have the financial problems we have today - many peoples' eyes were bigger than their wallets. So, be reasonable and look for a house you can afford.
So, that is it. If you fit these criteria, chances are you can get a mortgage. Good luck and good house hunting!
If you want more details about mortgages or you want to discuss your situation with me, email me at tmackinnon@metlifehomeloans.com and I will help you if I can.
Comments
It is disgusting that banks are being bailed out by the govt.This is a capitalistic system.If you cannot meet your bills, down you go.The same should happen with the banks, AIG, Citigroup, etc. Bank of America did not need any money,yet the govt (Paulson-an idiot) gave B of A money.When a person or corporation fails in this country, they either declare bankruptcy or go out of business. This should apply to banks, insurance companies, auto companies or any other corp that cries to the govt.There should be no bailouts.Let the CEO's chip in their great salaries and bonuses if they want to shore up their corp.There are no handouts in this country.That is why we have a capitalistic, not a socialistic, country.Bush is a disgrace, as well as Barney Frank, Christopher Dodd, Fannie Mae, Freddie Mac and any other govt official who did not regulate the banks, insurance cos, Fannie and Freddie.These phony govt officials should be thrown out of govt as well as all lobbyists that pushed govt officials to give such leeway to these failing corp.As the saying goes, "If they can't eat cake, let them eat bread".And you know what happened with the rest of the story. Marie Antoinette had her head chopped off by the guillontine in France. The same should happen to the corporations who did everything to bring down the house of cards.
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