Obtaining a Loan in Today's Real Estate Environment
January 31, 2012
When chatting with folks about the current real estate market, I am frequently queried about the difficulty in obtaining a loan to purchase a property. Questions asked are: Are lenders making loans? Do I have to put 20 percent down? Less often do folks ask about what their credit score needs to be.
First, there is money available for loans and lenders are making loans. Buyers are still using the FHA insured loans because they require only a 3.5 percent down payment. Conventional loans may require 20 percent down. The down payment on a conventional loan will depend on the lender. In obtaining any kind of loan, the borrower's creditworthiness is crucial.
Credit, income and assets are all examined. The lender will want to know that a prospective borrower has enough money in the bank to close escrow. These funds must be in an institutional account, not in a safe at the potential borrower's residence. Monetary gifts from relatives may be O.K. but they, too, will have to be documented.
Income is a big factor. Most lenders now require two years of tax returns from every loan applicant. You will probably need 30 days of pay stubs so don't throw them away.
Credit needs to show a minimum of 1 620 FICO score for most lenders to consider you a viable customer for a loan. There are sources where folks can obtain a copies of their credit reports. It is often useful for a prospective homebuyer to get a copy and to know how the credit looks.
In today's lending environment, there are more hoops for a potential borrower to go through but there are good loans available and the interest rates are at all time lows.
When chatting with folks about the current real estate market, I am frequently queried about the difficulty in obtaining a loan to purchase a property. Questions asked are: Are lenders making loans? Do I have to put 20 percent down? Less often do folks ask about what their credit score needs to be.
First, there is money available for loans and lenders are making loans. Buyers are still using the FHA insured loans because they require only a 3.5 percent down payment. Conventional loans may require 20 percent down. The down payment on a conventional loan will depend on the lender. In obtaining any kind of loan, the borrower's creditworthiness is crucial.
Credit, income and assets are all examined. The lender will want to know that a prospective borrower has enough money in the bank to close escrow. These funds must be in an institutional account, not in a safe at the potential borrower's residence. Monetary gifts from relatives may be O.K. but they, too, will have to be documented.
Income is a big factor. Most lenders now require two years of tax returns from every loan applicant. You will probably need 30 days of pay stubs so don't throw them away.
Credit needs to show a minimum of 1 620 FICO score for most lenders to consider you a viable customer for a loan. There are sources where folks can obtain a copies of their credit reports. It is often useful for a prospective homebuyer to get a copy and to know how the credit looks.
In today's lending environment, there are more hoops for a potential borrower to go through but there are good loans available and the interest rates are at all time lows.
posted by shirley harry at 8:57 AM
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