It’s halfway through 2010, and the housing market if finally starting to “come around” again. This also means that banks are getting conditioned to start gently opening their checkbooks once again. Increasing rates of people, who meet the banks’ standards, are getting funded at even 100% for a mortgage.
If you have bad, or even mediocre, credit, then you’re prospects for getting a home loan are obviously pretty grim. If you have steady income and substantial collateral, then you have a somewhat better chance; however, it’s going to have to a something that the bank can place a lien on and something that’s worth almost of the cost of the house you want in itself. Granted, most people can’t do this-but it is an option.
Home Loans – more on your credit
Banks want to be assured that you handle your money well and maintain your credit rating. That’s not only in times of crisis, but applies to regular markets just as well. Lending institutions look more than just your credit report and income many times, though. They look for any past bankruptcies, foreclosures, default credit card payments, outstanding balances and so forth. Trans Union, Equifax and Experian are the biggest credit reporting authorities, so you want to keep abreast of all activity on your accounts at all times.
Because credit is one of the largest factors in deciding if you will get a loan, and how much you will qualify for if you’re approved for a loan, that’s all the more reason to stay on top of your credit reports. Your score will usually be slightly different with each company, but the good news is that lenders will usually refer to the highest score while they make their decision.
Banking institutions themselves often have credit monitoring services. Whoever you get to keep track of it, it cannot be overemphasized-monitor it like you’d monitor a wolf guarding the henhouse. They usually even help you monitor it, by sending you email alerts when there is any activity on your credit report.
Digressing, make sure know the process your bank uses to review your report-as there isn’t a “de facto” standard among banks. That way, you’re empowering yourself to know what to focus on more in your credit report.
Your earnings and repaying the loan
The United States’ housing market tanked-big time-just a couple of years ago. Why? Because people, en masse, were taking-on loans that they could not afford to pay back. The worst part was that the lenders-such as Fanny Mae and Countrywide-knowingly approved consumers for what’s known as “sub-prime” loans. Those are loans for people who generally don’t have good credit and do not make six-digit incomes. They’re also loans with exuberant interest rates. That’s why the entire market fell apart.
That’s a prime example as to why you have to know what you are getting into, and you have to think to yourself “can I really afford this over the long term?” Just because most lending institutions do thorough credit/income checks, that does not mean that there aren’t over-zealous agents out there that just want to make commissions off “pushing loans”.
The National Credit Act and affiliate banks ultimately determine your eligibility and the terms of your credit application for a home loan. As a rule of thumb, they want to see that you can comfortably pay the money back over several years; also, they usually want your total monthly payment (including principal, interest and taxes) is no more than about one-third of your earnings.