Financing Is Tougher | California Current

With lending guidelines tightening up, here are a few tips that that will help you qualify for a home loan purchase or refinance today.

Establish Your Value as a Borrower
The most important factors in today’s guidelines are your credit history and your value as a borrower. Lenders want to make sure you are worthy of credit based on your credit history and they also want to know if you can pay it back.

Prepare Your Credit
- Do not make any big purchases. As tempting it may be to buy that plasma tv or leather sofa for your brand new home, a major purchase could jeopardize your credit history. It may not drop your score, but lenders will see these purchases as added liabilities. As a result, your debt to income ratio could suffer and you could pay a higher interest rate or worse yet, not even qualify for the loan product.
- Credit Inquiries. It is certainly a very savvy move on your part to shop around for the best deal, but keep your eye on the credit inquiries. In today’s market, lenders will not make an exception for your FICO if you miss the cutoff by a few points. Lenders see these inquiries as possible future debt liabilities. As long as you limit these mortgage inquires within the 25-30 day grace period - credit reporting agencies will understand you are shopping around for a good deal.
- Credit Score Preparation. If you are in the market for a new home or looking to refinance, I hope you know your credit score before you even apply. What I mean is that long before you enter the loan process, you should examine your credit. Don’t wait for your agent to let you know you could have qualified for such and such product if only your score was 40 points higher. Be proactive and take the steps to strengthen your credit so you can get the best loan terms possible.

Establish Your Income.
Now, I wish that you could boost your income if I simply told you to, but we all know that is another story. However, lenders are looking very deeply into your income these days, so it is important to you establish this value correctly.

- Gather your documents. Collect and file your pay stubs as well as your W-2 forms
- If you are self -employed. Make sure you have your tax returns as well as your profit and loss statements for the last 2 years.
- If you own property. Have your lease agreements to document the rental income and the current lender and loan information for each property
- Show me the money. If you document a certain income, lenders will want to see the supporting assets. Make sure you have the bank statements, 401Ks, or investment statements to support your income.
- Be Honest. Nothing wastes more time than having to deal with corrected documents and having to re-verify the numbers. Save your time and your integrity - be honest.

Bottom Line - Come Prepared
While your mortgage broker can work out the details, being prepared will speed up the process and give you a better chance at securing your loan sooner. In the last year, guidelines have not only become tighter, they have become more volatile. Over a weekend or even during the workweek - guidelines can change at a moments notice. By preparing yourself, you will have done your part to making sure you can qualify today.

Source: www.fairisaac.com , www.myfico.com

(3 votes, average: 4.67 out of 5)

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According to May and June statistics, California’s real estate market is experiencing quite a shift in home sales and mortgage activity.

In June 2008, it is estimated that about 42% of real estate transactions involved a foreclosure resale. Compared to June of last year, the foreclosure transactions only accounted for about 7% of the market. In addition, the financing and mortgage market are seeing ARMs at a six year low along with stated incomes and stated assets loans.

Market Favors Purchase Transactions over Refinances

Here in California, mortgage brokers are specifically adapting to the way borrowers are financed. With a wholesale lender exiting the business seemingly almost every week, the options and avenues are shrinking for brokers to finance homeowners. As far as mortgage activity, the financing of real estate has slid more towards purchases instead of refinances. Homeowners will often find that the declining values are hurting their loan ratios or that their current loan is outside of conforming and jumbo limits.

As a result, refinances have taken the back seat to purchases as the government is supporting this avenue a bit stronger. With FHA as a prime example, the government is supporting the purchase market as this will help to stimulate the housing economy. Refinances are still available, but those in jeopardy are finding better luck in loan modification negotiations with their lender. One thing residents of California can count on is a consistent trend towards tighter guidelines, dropping values, and even more foreclosures.

Not All Bad News

However, don’t take this all as bad news and declare doomsday - hardly. In fact, brokers who can adapt are welcoming this change in market pace. First of all, buyers can now search for deeper discounts as values continue to drop and short sales become more available. Financing is tougher, but it is still available for those who can actually qualify - this includes, good credit and a strong employment history that is verifiable (W-2’s, tax statements, and pay stubs). Long gone are the days of stated income and liar loans, but this is something we should welcome. It is part of the housing bubble correction and we should welcome the fact we are returning to a market where homeowners actually afford their homes. And while home values are predicted to decline still, you should definitely keep your eyes out and stay on your toes as this market is proving to be a strong market for keen buyers and investors alike.

Source: Dqnews

(11 votes, average: 4.91 out of 5)

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