How To Shop For A Mortgage Loan In A Down Economy

The chaos in the subprime mortgage market: higher standards for all. Home buyers, while with perfect credit records does not feel the pinch of time, home buyers for the first time, or borrowers with less-than-perfect credit will need help shopping for that first mortgage . Basically, thanks to lenders reining in their underwriting rules, a borrower without a significant down payment or a less-than-standard income may have occurred to look around a bit 'more difficult. Although this requires more care, you may still be able to find a loan that fits your budget and overall financial capacity. So, how exactly will these stricter rules about how you and shop for a mortgage? In this article, we will give answers to some frequently asked questions about how to shop and prepare for a mortgage loan recessed economy. 1. Can I still get a 100% financing? The widespread availability of 100% financing loans and 80/20 (where 80% was financed by a loan and 20% by another) is essentially over. Although this type of financing is still available, depends largely on your credit score. If your score falls below that mark 700, then the options start to disappear and it will be necessary to meet the more stringent requirements of recruitment. 2. Therefore, it is better to make a deposit? It 'always better to make a deposit. Ideally, you want to have at least 5% of the home as a minimum with at least 2-3 months of PITI (principal, interest, taxes and insurance) payments in savings in reserve. Any financial assets as investment to benefit from this obligation PITI. Furthermore, increased down payment will save you a lot of money for the duration of the loan. So if you are able to place a major advance on the table, without being "poor house," you will put yourself in a comfortable financial position. 3. Before buying a house, I pay my debt? Your total debt is not so important for donors, such as your credit score and down payment. It is still important, but when it comes to assessing the risks, lenders want to see how you handle debt. The standard debt-to-income ratio is 28/36, ie, a monthly mortgage payment should be within 28% of total monthly income, and total debt payments can not exceed 36%. That said, there is little good debt. The faster you pay back the loans, the more you become financially free. So instead of wasting money on monthly interest payment not to appreciate the objects, you have the funds available, however, for any of the costs of family profits. 4. Should I wait until I can improve my credit score? Probably. The average interest rate on 30 years fixed rate mortgage is typically 1.5 percentage points less for a person with a credit score of 760-850 that for someone with a score of 620-639. On a loan of 220,000 $, a borrower with a high credit score could save about $ 3000 a year for a borrower near the bottom of the range of credit scores. 5. Should I buy now before mortgage rates go higher? Interest rates can rise at any time, and that could turn a low level of buyer out of the market at a fixed rate. However, adjustable rate mortgages can save a lot of money to borrowers who are going to sell before rates go up or that can be found in a better financial position to refinance later. Adjustable rate mortgage (ARM), however, has its own risks. Lenders to offer rates lower than fixed-rate loans to entice you in, but the second year of the loan on, the arm can increase well beyond the original agreement.