New Home Loans and a Changing Mortgage Industry
Sheryl LandrumLoanBiz Columnist
The recent
foreclosure crisis has affected the way that mortgage companies underwrite new
home mortgage loans. Stricter underwriting guidelines are designed to protect
consumers and mortgage holders against defaults, whether they are loans for a new
home purchase or a refinance of an existing mortgage loan. If you are looking
for a loan for a new home purchase or a refinance, here is what you can expect
to find when you meet with your lender.
New Home Loans and
Your Credit Score
Credit scoring is more important then ever for getting a new
home loan. Borrowers with credit scores less than 680 have been considered Alt
A, or sub-prime, borrowers by lenders for years and have not been able to
qualify for good interest rates on their mortgage loans. Now Alt A borrowers
may not be able to qualify for any new home mortgage loan without full
documentation. This means the ability to
prove income and assets and funding mortgage impound accounts for property
taxes and insurance. Lenders are also restricting the type of mortgages they
will give to sub-prime borrowers and are increasingly making it more difficult
to do adjustable and variable rate home loans that are interest only and are
over 80% of a home's value.
Even Prime Borrowers
May Have Difficulty
Even prime borrowers will find that they need more when
qualifying for a new home loan. If you have great credit you still might not
get the best interest rate for your mortgage loan without going through more
restrictions than you would have a year or two ago. Lenders are giving prime
interest rates on new home purchase loans to home buyers who have a sizeable
down payment (20% or more), can document their income and assets, are willing
to have impound accounts, and are looking for a more conservative or secure mortgage
loan such as a 30 year fixed rate mortgage. Those borrowers who are looking for
adjustable rate mortgage loans, who want to put less than 20% down on a new
home purchase, or access more than 80% or their home's equity, as well as those
who are looking for a mortgage loan on investment property, are going to find
it more difficult to qualify for a new home loan at good market rates.
While it may seem that the mortgage industry is being unfair
when it comes to qualifying for a new home loan with a good interest rate, the
industry is actually reverting back to good mortgage loan principles and
practices. The past two years have seen many home borrowers defaulting on their
new home loans. While I think that it is true that most of us would love to own
our own homes, taking on a mortgage loan is a huge responsibility and one which
is best served by being able to adequately afford it. Make sure you act
responsibly and work with qualified loan officers and lenders to ensure that
your new home loan is one that will work for you.
About the Author
Sheryl Landrum is a Senior Loan Officer with First Capital Mortgage in San Diego and Prudential Realty in Bonsall, California.
