Last week, mortgage rates took a dip with 30 year fixed rates falling back to the mid 5 percent levels. The rate drop was spurred by news from the Federal Reserve that it would spend hundreds of billions to buy issued debt in hopes of stimulating the housing markets. Although the recent rate drops have sparked consumer interest, many consumers are still shy to enter this housing market due to fears of this recent credit crunch.

Unfortunately, many potential homebuyers and homeowners are taking this news too generally, and incorrectly assuming they can’t possibly qualify for a mortgage these days. You certainly won’t find the same loans being offered in the past, but if you can actually afford a home and can prove it–you’ve still got a decent shot even in this market.

Rule #1 - Down Payment
The more, the better. Traditionally speaking, down payment requirements of 20% were the norm and if you can manage to save up that kind of cash, great. Fortunately, you don’t necessarily need 20% down even in this tightened credit market.  Fannie and Freddie still offer conventional loans with down payments as little as 10%, while the ever popular FHA still offers down payment requirements as low as 3.5%. Having a larger down payment will help lower your risk factor in the eyes of the lenders, as you are less likely to foreclose on a property which you hold equity in.

Step 2 - “Good” Credit
Your credit history is a record of your past payment history, and a strong indicator of your future credit reliability. Although excellent credit is preferred in today’s market, those with good or satisfactory credit can still find ways to get qualified. Each lender will have their own credit criteria, but many FHA lenders can still go as low to 580 credit scores. Lenders will investigate further into your credit these days, so it’s best to make sure you avoid defaulting on any housing related accounts, as those carry more relevance. If you’re credit history isn’t in the best shape, you can check out these 3 tips to help improve your credit.

Step 3 - Prove Your “Qualifications”
Mortgage lenders have learned their lesson and realized that they need you to prove your qualifications, instead of just stating them. Even if you meet the lender’s criteria for income and assets for example, you’ll need the appropriate documents as proof of these statements. In most cases, lenders will be looking for your tax returns, pay stubs, and most recent bank statements. If you’re actually qualified, this shouldn’t be a problem–lenders are just taking a closer look to weed out folks guilty of misrepresentation.

The game is still the same, but the rules have changed a bit. Actually, if you disregard the past few years of mortgage lending, the rules might still be the same for you. I mean, let’s face it, the days of “no credit, no down payment, and no documentation” are long gone and we’ve all seen the consequence of this type of lending. If you’ve been thinking of buying a home or finding a mortgage, talk to a mortgage broker in your area to find out how you can qualify in today’s market by using our Mortgage Broker Directory.

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