Gone are the times where mortgage lenders handed out loans to home buyers with no proof of income and no money down. Lending standards have tightened substantially, making it more difficult to obtain mortgages at reasonable rates. What you need to know about this market...
Down Payments Are Very Important
To get the best rates in today's lending environment, a down payment of 5% is crucial. If you can't get that, then sometimes a 3% down payment will get you into a loan insured by the
Federal Housing Administration (FHA). In Idaho, however,
Idaho Housing and Finance Association (IHFA) offers 100% purchase loans at very good rates. These loans have income and/or loan size restrictions, property type restrictions, and include mortgage insurance for any loan with less than 20% down.
Reduce Your Debt Load
As much as is possible, try to reduce your debts before applying for a mortgage. You should be able to find a mortgage with a competitive interest rate if your debt-to-income ratio (DTI) is less than 42% of your gross monthly income. Calculating your debts for DTI takes into account your mortgage payment plus other debts that are showing on your credit report.
If your credit score is below 600, or you cannot document income and assets, you will still be able to find a mortgage.but the rate is going to be ugly! With the current lending environment, you may be best served waiting a year or more to see if mortgage lending guidelines are loosened up.
Jumbo Loans Are Very Expensive
Jumbo mortgages are defined by loan amounts of more than $417,000. Jumbo mortgage interest rates have been as much as .75% to 1% higher than standard rates. To avoid this, try to increase your down payment so that your mortgage loan amount falls under this level.
Regards,
Eric Leigh, Senior Loan Officer
Millennium Mortgage & Insurance, Inc.
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