How to Get a Mortgage in Tough Times (Like These)
Like what you’ve read here? Subscribe to Money Hacks by Email.
Today’s mortgage market is tough, really tough. It’s a stark contrast to the market of just 2 years ago. The liquidity is gone. Bankers have decided they’d rather muddle through this housing market than capture market share or risk any of their flagging capital.
However, the housing market is definitely a buyer’s market — IF you can get a mortgage.
Here are some tips. Unfortunately, you may be disqualified before you begin. Lenders are really sticking to 20 percent down, with 80 percent financed, and your FICO must be very good.
- Know what you can afford. Don’t even try to get a mortgage that costs you more than 28 percent of your income per month. You won’t get that loan at a good rate, if at all.
- Know your FICO. Don’t do anything to cause it to decline (don’t open new credit lines, no new inquiries, etc.).
- Get all your financial papers in order: Pay stubs, tax returns, car payments, credit card bills, 401k statements. Basically, anything and everything that shows your financial status. Don’t leave out the bad: It will find you!
- Pay down as much on other loans as possible. It’s best if you carry no debt whatsoever, but that is not very realistic for most people.
Remember, you need to have a sparkling credit file, and you need to portray yourself — all above-board, of course — as a superlative credit risk (i.e., not a risk at all). With so few dollars being lent out, and so few lenders willing to go out on a limb, you are not only competing with history, you’re competing with your fellow borrowers. The cleanest borrowers will win the day — and the mortgage that could be yours.
Prepare now for this. This crummy market could last another few years. You have time.