The US market for homes peaked in early 2005, began to decline 2006 and 2007 and then reached new lows in 2012. The home price index reported by Case–Shiller showed that in December of 2008 there was the largest housing price drop in history. This marked the bursting of the housing bubble. Since then, money has become very tight.
Who has money to lend?
Freddie Mac and Fanny Mae remain the largest investors in mortgages. They establish the rules and operate under the understood promise that the US government will step in to bail them out if necessary.
Harder to qualify
Fannie Mae and Freddie mac and those lenders whose loans they buy have made it more difficult to qualify for a mortgage. The first people to be affected were what are called subprime borrowers but even borrowers with the best credit ratings have felt the squeeze.
What do I need to do to get a mortgage?
The credit-tightening squeeze that has occurred over the past several years has basically returned us to what would be called “customary lending standards” that lasted until about the year 2000. This means there is now a renewed emphasis on the three C’s of credit. These are credit history, capacity (the continuity and depth of your resources) and your collateral or the value of your property and your equity or down payment. In other words, to get a decent interest rate you will need a high credit score, a substantial down payment or good equity.
What interest rate can you expect to get?
According to the website www.myfico.com the average interest rate is 5.9% for borrowers who have credit rates of 700 to 850. However those with credit scores of 580-619 were seeing interest rates of 9.4%.
How much money should you put down?
People who go through the Fanny Mae automated underwriting system can generally get by with a down payments as little as 3%. However, for other kinds of Fannie Mae or Freddie Mac loans you would have to put 5% down. The same would be true if you want to do a refi and take cash out. In this case you would pay 5% and would have to have at least 10% equity left after the loan is made.
Is it still possible to get nontraditional financing?
You can still get what are called “piggyback mortgages” through Fannie and Freddie. This type of mortgage is where you get a first mortgage of up to 80% (to avoid having to buy private mortgage insurance) and then a second mortgage covering the balance–up to their maximum loan-to-value ratios.
You can get a co-signer and get an FHA loan but you will have to pay PMI or private mortgage insurance.
Today’s mortgage interest rates
As of this writing (August, 2012), mortgage interest rates were trending downward slightly. For example, on June 27, the average mortgage rate for a 30-year fixed mortgage was 3.89%. By July 11, this had dropped to 3.79% and up to 4.77% on August 1. Then on August 8, it had decreased slightly to 3.81%. Adjustable rate mortgages followed about the same trend with an average interest rate on June 27 of 3.02%, which dropped to 2.91% on August 1 and then to 2.90% on August 8. Of course, it’s important to keep in mind these are averages and that mortgage rates vary from state to state.
If you can’t qualify
If you can’t qualify for a mortgage, it’s probably because you have a lousy credit score. And if you have a bad credit score, it’s probably because you have too much debt. If this is the case, you should let our debt consolidation providers help you get that debt under control. We offer a 100% satisfaction guarantee–if you are unsatisfied with the consolidation plans you’re offered, you can get out of the program with no fees or penalties. Call Debt Consolidation USA today or fill in the form you will find on the top of this page to get a free estimate.