Everything You Need To Know About Mortgages

Lender guidelines   by Heidispeare

Due to the changing economic climate with mortgage foreclosure rates still rising, lender guidelines are increasingly more restrictive. For realtors assisting buyers this means they must stay on top of the changing lender guidelines. Investors, backing away from sub prime home mortgages, are attempting to attract business while at the same time reduce the risk of home foreclosures. Most lenders are tightening their guidelines on new home loans. These changes are a direct result of the rising rate of home foreclosures. If they continue to rise we can expect even more restrictions.
According to the Wall Street Journal, top mortgage lenders have worked out an agreement to improve and speed up the industry’s efforts to help homeowners that are struggling. Past policies have been blamed for much of the home mortgage crisis across the country. A slowing economy has deepened the distress and will prolong the housing market decline.
Typically, what lenders are looking for is evidence that the applicant is capable of paying the mortgage. They have set up a standardized set of guidelines to help them evaluate each loan request. One of the first things that a lender will look at is your credit report and credit score. Before the subprime meltdown, credit scores starting at 680 were acceptable for a new mortgage, whereas now, the minimum credit score needed is well over 700. Lenders will look for past bankruptcies, repossessions, accounts in default, judgments and payment history.
With the hope of reducing the rate of home foreclosures many lenders are now requiring more equity to be left in the home. The 100% financing deals are a thing of the past. Statistics have shown lenders, that borrowers who have equity in their homes are more likely to avoid foreclosure than those who do not have equity. Borrowers requesting a second mortgage or home equity line of credit face even tougher restrictions if they want to borrow more than 89.9% of their homes value. This means higher down payment ratios on all home loans, especially homes purchased as investment properties. The loan to value limit for a single loan or a combined loan is restricted to a value of 89.9%.
Job stability with your current employer and how long you’ve been in the same line of work are also factors considered by lenders. Income is factored into the debt ratio; usually monthly wages are used with overtime and bonuses being averaged for the last year or two. Additional sources of income may be included depending on the history of the income and how long that income will continue. Credit card debt and other loans are taken into consideration in this debt ratio. Most lenders will evaluate the consumer debt when assessing the debt ratio. Maintaining a low balance on your credit cards, while going through a mortgage application process, is highly recommended. For more information on this matter visit http://bristolrestoration.com/main/fha-compliance-and-lender-requirements/.

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