By Bill Davis

April 9, 2012

Can tighter lending rules worsen the state?

Mortgage Famine With the onset of 2012, the most important question that is bothering prospective homeowners is how they can beat the mortgage famine this year. Will the tighter lending regulations of the banks and the financial institutions affect the fate of the prospective homeowners? According to the present mortgage market conditions, hundreds of homeowners who are above the age of 50, the self-employed and the first-time home buyers will find it extremely difficult to grab new lines of credit as they need to unlock wealth that they've tied up in bricks and mortar and then follow up to get their first home.

While the mortgage giants and the traditional lending institutions plans to ask borrowers to prove their gross monthly income and their ability to repay the mortgage debt, there is a potential risk that the government's interference may even come up with some unintentional circumstances. Due to the banning of the self-certification mortgage loans and have restricted access to the home mortgage loans that won't be repaid before the borrower reaches his retirement age, the self-employed people find it difficult to buy a new house. Though the economists find it impossible for the mortgage market to recover from what it's going through, there are certainly some steps that the borrowers can take in order to grab the best mortgage loan and beat the mortgage famine.

  • Study your credit score: Good credit score is always the key to snagging a home loan in this tight lending environment and if you too want to be one among them, you have to ensure that you study your credit score by ordering a free copy of your report from the three credit reporting agencies. Review the reports carefully to ensure that all the erroneous information that is responsible for dropping down your score is removed. Most lenders nowadays will require a score that is above 720 in order to get a loan at an affordable rate.
  • Establish how much you can afford: Don't rely on the mortgage lender to tell you how much mortgage loan amount you'll be able to afford. Plan your post-mortgage budget and leave some space for unexpected expenses so that you know how much money you can exactly pay back every month on the mortgage loan. You can even use the mortgage affordability calculators to help yourself.
  • Consider your DTI ratio: Apart from your credit score, another figure that holds enough importance during the mortgage buying process is your DTI ratio. This is nothing but the ratio between the debt amount that you owe and the monthly income that you make. If the mortgage lender sees a high DTI ratio, he will either reduce the loan amount or increase the interest rate to shove off his risk. Repay your revolving debt, especially in the form of credit card debts so that you can easily lower the DTI ratio and prove to be trustworthy to the lender.

The US Department of Housing and Urban Development (HUD) has provided counseling agencies throughout the nation that help all the struggling homeowners and the prospective homeowners with advice that can help them prevent a foreclosure. Get help from their valuable advice so that you may be able to take out the right mortgage loan for your needs.

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