Tough Requirements for Mortgage Loans

If you live in California or Florida, it’s is definitely harder to qualify for mortgage loans in these areas than other areas that have been less affected by the housing slump. The same “no money down deals” that used to be so popular in these states are now gone. In their place, you will find some that houses in these areas will require at least a 10% down payment, if not more. This may seem hugely unfair for some when they realize the same is not true for other areas of the United States where the housing market has not declined as much. In those areas, you can still get mortgage loans with only 5% down.

Your Credit Score Is More Important

Credit score requirements for mortgage loans have risen. A good score will have to be above 720, which is fairly high. If you don’t meet the new, more stringent credit score requirements, the bank may still offer you a loan – after you pay substantial upfront fees. As if that weren’t enough, you will be offered a higher interest rate to compensate for any deficiencies in your credit reporting. This may make it difficult to qualify for a higher amount after you take into account more money to pay for fees and monthly payments.

What About Previous Data?

If you qualified for a loan before the new rules, you may have some nasty surprises ahead of you. Mortgage loans approved in the past can easily be affected, with the most common problem being how much of a cushion you need to buy the house. If you qualified with a 5% down payment, you might need 10% now. Since the percentages are based on the total cost of the home, the borrower may be facing an addition of many tens of thousands of dollars they need to come up with before closing. This is why many people are finding that even if they qualify, they are caught short.

Check Your Local Market and Lenders

The situation is not the same in every state in the union. Be sure to check your local real estate market and lenders. Lenders are becoming more aware that some areas have resisted the downturn and they are not as concerned about fallout in housing prices there. This can impact the types of offer that are available in your area versus some place like Florida. As long as the market is good in your area, you will probably have more choices in mortgage loans and favorable terms than other more affected areas.