Many potential first time homebuyers are wondering what to expect when they approach a lender given the latest developments in the whole mortgage mess we are in. Will the required down payment be more than 5 to 10%? Are there any 0% down payment programs out there for first time homebuyers anymore? How does the first time homebuyer sort through all the changes that are taking place anyway?
Many first time home buyers have these questions as well as other pertinent questions on their minds. This is in part because of the current credit crunch that the United States is experiencing. The answers? Yes, there are 0% down payment programs available for the first time homebuyer still; however, many have stricter qualifying regulations. Being aware of the changes in the rules can help avoid stress and confusion during the buying process.
One of the first and most important things to consider is that credit scores are more important today then they ever have been. Chances are if you have any blemishes on your credit score at all a lender will not want to extend a 0% down payment loan to you. Therefore, before even beginning the process of pre-approval or shopping for homes and or lenders you will want to pull your own credit report. You can actually do this once a year for free from each of the three main credit agencies. Look at the report to see if there are any items listed that need your attention. Dispute anything that is not correct, if something has been paid in full but is not reported as such you can have that changed before a lender looks at the report.
You are likely to find that lenders are getting rather restrictive on a whole and particularly with the ratios that they use when qualifying for a loan. For instance, if you need private mortgage insurance, which is generally required for people who put less than 20% down, then the private mortgage insurance company might require a larger down payment. They may simply allow a smaller ratio as well; this will end up lowering the total amount that you are able to borrow. It is competitive today and despite the fact that people want and need to move the huge number of available homes off the market lenders want to make sure they will not be foreclosing on a home because of defaulted loans too.
Fully understanding all the rules and doing the foot work first is very important in this tougher mortgage environment; however, doing so will put you ahead of the game and help to secure your mortgage and your first home.
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