Buying A Home When The Mortgage Market Is A Mess

Buying A Home When The Mortgage Market Is A Mess

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The home mortgage market is a mess. Well not entirely, but the sub-prime lending fiasco of recent months has certainly taken its toll on the mortgage lending industry. You don’t have to be one of those borrowers who had their home repossessed to know what I mean: buying a home today has gotten difficult even for credit worthy borrowers as home mortgage lenders have tightened credit and raised their rates. Is it a bad time to buy a home? No it isn’t, but you must get back to the basics before applying for a home mortgage if you want to loan approval and a competitive rate. Let’s take a look at what steps you can take now to make sure that buying a home doesn’t become one big headache.

Take Care of Some Personal Business First

home mortgageBefore you apply for a home mortgage, you’ll want to do a little personal business first:

Run Your Credit Reports – Did you know that your credit reports contain all kinds of information about yourself? Unfortunately, many reports are inaccurate and can adversely affect your creditworthiness. Obtain copies of your three credit reports from Experian, TransUnion, and Equifax and examine them closely; if you find errors contact each of the consumer reporting companies directly to have them remove their mistakes. Once your report has been updated, your credit score should improve, perhaps enough of an improvement to lower the mortgage lending rate.

Pay Off Debt – Most consumers carry a fair amount of debt, but for those people buying a home who have too much debt trouble could be brewing. Mortgage loan rates are determined by a number of factors, including consumer debt. Try to pay down or pay off outstanding loans or at least bring your debt levels to a manageable level before applying for a home mortgage.

Shop Around – Once your creditworthiness becomes clear, start shopping around for a loan. Mortgage lending has changed over the years as longer repayment periods, variable rate loans, and other home financing methods have sprung up. Besides your bank or mortgage company, you may be eligible for loans backed by the Veteran’s Administration or Federal Housing Administration. On the local level you can find state, county, even city programs offering special rates for qualified buyers.

Get Pre-Approved – You may have heard that realtors like to have home shoppers pre-qualified before showing houses to them. All this does is tell the realtor that you probably can get approved for a loan. One step better is for you to get pre-approved by a lender for a mortgage loan. This can be very helpful if you are bidding for a home against another party and your home mortgage paperwork has already been approved. All things being equal, a seller will choose the party who is mortgage ready over the one who hasn’t started the mortgage lending process. Qualifying is good, but being approved is best.

Make An Offer They Cannot Refuse

Naturally, if you are buying a home in a depressed market then as a pre-approved buyer you have substantial leverage in the negotiation process. Even in a strong housing market your preparation can quickly establish you as a serious buyer and get you the house you want before other bidders step forward.

Yes, problems with the sub-prime mortgage industry have changed the mortgage lending industry for the short term, but the financial benefits for you can be realized if you tend to some personal business first.

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Comments

  1. james wong
    james wong 13 December, 2007, 22:20

    This should be the golden opportunity to buy a property. But, it could be like catching a falling knife as the market will take a long time to bottom out. Just be prepared and wait for the right time to buy.

  2. MattKeegan
    MattKeegan Author 14 December, 2007, 11:26

    Good analogy, James. The market seems to be stabilizing in my area, in fact home prices have begun to creep back up and houses are staying on the market for shorter periods of time.

    I guess it depends where you live — some markets still have yet to hit bottom.

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