What It Takes To Qualify For A Mortgage In A World With Standards

By July 21, 2008

The party is over. If you want a mortgage you’re going to have to be able to afford it. Oh no! Now what are you going to do? Kiplinger’s has an article that explains how mortgage lending works when there are “standards” involved. How quickly we all forget…

To get a mortgage now, “you’d better walk on water,” says San Diego mortgage broker Victoria Johnson. And she’s only half kidding. Lenders acknowledge that their credit tightening is really a return to normal lending standards, last seen in about 2000.

Patricia McClung, of Freddie Mac, says that getting back to basics means a renewed emphasis on the “three C’s of credit”: credit history, capacity (the depth and continuity of your resources) and collateral (the value of your property and your down payment or equity). “If you’re down on one of those, you don’t want to be down on the other two,” says McClung.

Basically, what you need in order to get the best deal is: a high credit score, a down payment or equity, documentation, and financial reserves, says Kiplinger’s. You can still get a mortgage without all of those things, but it will be more difficult and you’ll pay more in interest. The article answers several questions you might be having, such as: “How big should my down payment be?”, “Can I still get nontraditional financing?”, and “Is this a good time to refinance?”

What It Takes to Get a Mortgage Now [Kiplinger]
(Photo: qshio )

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Comments

  1. RamV10: The Axeman Returneth says:
    July 22, 2008 at 1:55 pm

    As my 91 year old neighbor said to me yesterday after I finished mowing his yard (I still live in an area where we talk to/help out our neighbors) “I guess renting’s really the only option for you kids anyhow, You young people are all getting screwed when it comes to buying houses”.

    Granted, I’m getting a hell of a deal on the place I’m renting, but he’s absolutely right.

    I’m even the type of person who could buy a fixer-upper, and the amount of money a shithole costs is insane too.

  2. Ilikenumbers says:
    July 22, 2008 at 2:44 pm

    NACA is legit. The process is long, but it is legit.

    Re: Jumbo loans and deductibility, You can deduct the interest paid on only the primary loan.

  3. ZoeSchizzel says:
    July 22, 2008 at 5:32 pm

    @bwcbwc: We would, but the area where he will be working is a pricey tourist beach area. Year-round rentals nearby are impossible to find, and if you can find a rental the price is outrageous. Most of the hotels have to provide buses to get their workers from the less expensive areas of the county down to the beach, about an hour’s trip one way. Consequently, they are always short of workers and the pay is very good — IF you don’t have to spend money on gas to get there. Plus, WE want to invest in property, and we can easily afford it. So, there you go.

    My main point is that with the economy the way it is, and with families changing the ways they live (many middle-aged families are facing a dual problem of taking care of elderly family members and launching their children at the same time), the banking/mortgage industry is going to have to change the way they look at lending. Yes, qualifying for a mortgage based upon income is a no-brainer (ya think?? I’m looking at you sub-prime idiots), but why turn down people who are willing to pool resources? I mean if we’re willing to put up our $425,000 house (paid for) and all of our other assets in order to secure a loan for only $80,000, then they should be willing to put whomever’s name we want on the loan!

  4. jayheavner says:
    July 22, 2008 at 5:43 pm

    My wife and I had to jump through a lot of hoops to get an FHA loan. We ended up borrowing approximately $625,000 @ 6.75% but our income is north of $250,000 and our credit is almost at 800. I honestly don’t know how most people will secure loans. We had to provide reams of documentation about things I felt had no relevance on our ability to pay our mortgage.

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