Two years ago every mortgage bank and some mortgage brokers had access to over 100 lenders who each offered many programs ….choices. Now in 2009, you can count the number of programs on your hands, in some cases on a couple fingers from one hand. In order qualify for a mortgage now a borrower can’t have any shortcomings. The mortgage process is divided into credit scores, LTV (Loan to Value) and income or debt ratios. In prior years, one could get a loan with one or two of these areas now you need to have all three work. Credit scores drive the transaction now, where a 699 used to be a very good score, now you need a 741 to get the best rate.
The Fannie Mae grids where a credit score fall into different buckets, where 620 is now the bottom, the lower your score bucket the more it costs you to get the best rate, those with a 741 or greater can smile.
Loan to Value did not used to mean that much since programs existed where one could put down a zero down payment to buy a home, now the minimum is 3% and the only program left with that is an FHA mortgage. Most programs need 10% now and one must have very good credit for qualify since PMI (Private Mortgage Insurance) is needed since 20% was not the down payment.
In the past one could get a No-Doc loan (No income or job verified), a No-Ratio (No income is put on application, job is verified) or a Stated Income (Income stated to meet qualifying debt ratios) and of course a full documented loan. Now it’s pretty much a full documented income loan or nothing. Ratio’s used to push as high as 60-65% of gross income, now it’s 36/41 maximum. (36% of gross income for mortgage payment, 41% for all debt).
Programs have been eliminated, guidelines have been tightened and long and short you need all cylinders running to get a mortgage these days.
Tue, Apr 14, 2009
Mortgages