Credit Score News, Tips & Advice
Website CertifiedPrivacy Protected

Homebuyers Can Get a Mortgage in 2010

By Sally Maison
Published: Tuesday, December 8th, 2009

After three long years of housing crash, the real estate industry is once again showing signs of stability going into the last month of 2009. Home sales went up, inventory levels decreased, and prices slowed down their decline. Potential homebuyers who want to get mortgage next year can do so at the best interest rates provided they do a few things right. A down payment, an excellent credit score, and understanding of new FHA rules are all they need to finally have their own home.

Homebuyers Can Get a Mortgage in 2010Prices skyrocketed during the first half of the decade because of the lax standards by lenders. They granted mortgages without down payment or documentation that borrowers could meet their monthly payments. But mortgage delinquencies went up to record highs this year while unemployment rate for the whole United States was at 10.2 percent last October. Finance expert Scott Stern says there is a lot of tightening that can be expected from lenders in 2010, and it could already be felt as early as now.

The Federal Housing Administration (FHA) just recently increased its minimum down payment to 3.5 percent. Another finance specialist, Guy Cecala, says homebuyers who want to get the best rates should at least have a down payment of 20 percent. But he tells consumers that it does not mean they are not getting any mortgage if they do not have that money. It is just that they will not be getting the best rates.

Another key to getting the best rates is by having an excellent credit score. Cecala noted that lenders normally give very low interest rates to people whose credit ratings are 730 and above. Having a high credit score is also important to homebuyers who want to get an FHA-backed loan, since the Housing Administration is raising its minimum required credit score to 620 this month. Fortunately, many FHA-secured borrowers are not having trouble getting that credit rating since their scores average at 690 points.

Nearly three out of every ten mortgages are secured by FHA but the increase in the number of loans it secures also means increased defaults for its borrowers. Specialists say that is what prompted FHA to raise its credit score requirements—to minimize risks of default. Secretary Shaun Donovan of the Housing and Urban Developments say they want to make sure that they can continue securing loans for homebuyers in the future that is why they have increased lending standards, which includes the raising of down payment and the minimum required FICO credit score.

Specialists remind consumers that FHA uses the FICO score so they urge consumers what their rating is before applying for mortgage.

No Comments

No comments yet.

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.