5 Tips for Homebuyers Seeking a Mortgage
Nervous lenders have tough new rules and are paperwork crazy. Here's five things to consider before applying for a loan:
1. Down payments are critical. Borrowers should expect to put down at least 10%for a “conforming loan” – a mortgage that Fannie Mae and Freddie Mac will purchase.
2. Credit scores count. A 720 on the 850-point FICO rating scale will get a borrower access to the best rates.
3. Consider VA and FHA. Borrowers without down payments or with less than stellar credit scores should consider these government-insured loans offered through the Federal Housing Administration of the Veterans Administration.
4. Unearth the records. Before applying, borrowers should organize tax, banking, and other records that prove income, savings, and debts. They should also expect to be patient about what may seem to be endless requests for information.
5. Get rid of debts. Limiting debts, including what borrowers expect to pay for the mortgage, to less than 43% of gross income is important.