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 May 30, 2007

Tougher Lender Regulations Keep Some Home Buyers Out of Market
As a result of the recent need for tougher lending standards, some lenders are tightening the rules. These changes can make the loan application process much more difficult for potential home buyers to obtain a loan.
The following criteria are the most affected:

Down payment. Lenders are now shying away from 100% financing and asking for some down payment, even as little as 5% or 10%.

Income and Income Verification. Prospective borrowers now more than ever will need to produce proof of a regular income for gainful employment. Loan based on "stated income" are mush harder to obtain today. Lenders are also not likely to approve a loan where the buyer will be spending more than 45% of their total income paying off debt- including their mortgage.

Credit Score. Typical credit scores range from 300 to the low 800s. Potential borrowers with a score higher than 680 are more likely to qualify for a better deal on a loan. Scores between 660 and 680 could meet qualification requirements, but could cost more. Applicants that have scores that are lower than 620 will need to raise their scores before they apply for a mortgage.

Ability to Repay. Gone are the days when buyers are qualified at a low initial rate. Applicants must now qualify for the loan payments which are at rates that are equal to what the loan would be if it reset to a higher rate.

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