With the blooming beautifully manicured landscapes, fresh-cut lawns and new signs of curb appeal, Spring used to be prime time for home buying. But with all of the hoops that potential homebuyers now have to jump through just to begin the process, tis the season of one in three Americans walking away from the actual home buying experience without an actual mortgage.
According to the financial experts at WalletPop, “Understanding the mortgage process and meeting lenders' more stringent qualification requirements have become big obstacles for applicants, according to a survey [MortgageMatch.com] conducted. Most recent home buyers – 70% – described the mortgaging process as more difficult than they expected. And those who bought homes during the bubble years, when mortgage loans were given out like candy at Halloween, are especially shell-shocked by the new lending standards.”
Poor credit scores are often to blame for America’s mortgage issues. Consumers clamoring to take advantage of the current “buyer’s market,” and low real estate prices, often fail to wait until scores have recovered from a recent credit crunch, creditor claim or bankruptcy. In fact, a recent Fannie Mae survey found that dismal credit histories were the top reason that renters gave for not purchasing a home.
Despite the fact that home prices are back to 2002 levels and interest rates among the lowest we’ve seen, many (rightfully so) feel they can’t afford to buy, or, still believe it’s “not a good time.” “A full 35% of successful buyers said they didn't even know their credit scores when they started to look for houses to buy. Somewhere, a Realtor is clenching his or her teeth just reading that. These buyers decide they want to buy a house but don't know their credit scores? Home-buying is a process that starts with getting your financial house in order and then hitting the brick and mortar ones.”
As such, here are five steps to buy back the confidence before you buy that home:
Start by Paying Down your Debt.
Reduce your total debt -- your monthly payments on cars, student loans, credit cards -- before you start the mortgage application. The goal is to reduce your overall debt-to-income ratio and improve your credit score. The somewhat unrealistic guideline that lenders want everyone to toe is that your total housing expenses not exceed 28% of your monthly gross income. For decades, people have exceeded that quite happily but now the lenders believe they know best and they control the money.
Clean up your credit.
Get your free credit report from all three credit bureaus (Equifax, Experian and TransUnion) and carefully review them, and correct the bad or inaccurate information, if possible. In most cases, “your credit score needs to be a minimum of 680 -- preferably 720 or higher -- to qualify for a lower interest rate on a mortgage.”
Put off the big purchases.
Avoid new credit until you close on your home. As WalletPop puts it, “Lenders check credit reports at the time you apply and then again right before closing. A last-minute spending spree is going to be flagged.”
Increase your down payment.
Whether you’re using your personal savings or the wealth of a rich relative, putting down a larger (rather than smaller) down payment reduces the loan-to-value ratio and improves your chances of getting a loan. And if you’re a first-time home buyer, there’s a community program with your name on it to help you with the process.
Gather than paperwork together.
When embarking on the home buying experience, you’ll need to provide your lender with pay stubs, bank statements, assets, credit documents, income tax returns, and pretty much any financial statements you can think of. Get your records in order and make copies of all of it.
Sound impossible in your current financial situation?
Fortunately, escaping bad debt to eventually moving forward with you home buying dreams is precisely the scenario for which bankruptcy was created. If you’re having trouble getting your mortgage, bankruptcy can help get you back on the right side of the proverbial mortgage tracks: allowing you to surrender your other debts, negate your personal and financial liability, and move forward financially.
Don’t wait for your own personal housing dreams to fade. If you have been hit hard by tough economic times, knowing a qualified bankruptcy attorney can help you to conquer your creditors and face your financial fears, yielding the right kinds of support, information and insights—at a low cost— for a viable and secure future beyond our own “Great Recession.” The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to +1-919-646-2654, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.