Plan ahead to obtain mortgage in tight market
If you're a would-be homebuyer trying to take advantage of the remarkably low mortgage rates available, it's likely you'll confront high hurdles to credit approval and voluminous paperwork.
Mortgage experts say the core issue is that Fannie Mae and Freddie Mac, the nation's two behemoth mortgage companies, have more demanding standards than in the past. And most lenders in America heed the companies' standards.
Dale Robyn Siegel, a mortgage broker and author of "The New Rules for Mortgages,” said Fannie and Freddie — currently operating under tight federal scrutiny — are attempting to perfect a system that limits lending solely to creditworthy borrowers.
"To stop the bleeding from foreclosures, they're trying to revamp the mortgage system by trial and error,” Siegel said.
She's convinced that what will emerge eventually is a sounder, more streamlined mortgage lending system. And she predicted that eventually the most cumbersome rules for mortgage processing will be refined. In the meantime, however, she urged mortgage borrowers to be assertive.
Here are pointers for those planning to seek mortgage approval in the near future:
→Inform yourself on mortgage basics before you apply.
Having basic knowledge about mortgages before you apply should help you earn the respect of your lender. You'll be more capable of deciding the best type of loan for you, and you'll be less vulnerable to persuasion by unprincipled lenders, said Sid Davis, a real estate broker and author of "A Survival Guide for Buying a Home.”
You can do a quick study on home-buying essentials by visiting the website of the U.S. Department of Housing and Urban Development ( www.hud.gov). In addition, Davis suggested you go to your local library or bookstore in search of a book on mortgages, though he cautioned that any book on the topic that was published more than a year ago could be out of date.
• Arrange a face-to-face meeting with your mortgage lender.
A face-to-face meeting is especially important for those expecting to confront special challenges to loan approval, said Marty Qualls, who makes mortgages on behalf of several large banks. Such applicants include the self-employed, those with credit scores below 700, and those who have limited assets, such as savings accounts, on which to rely if they can't meet their mortgage payments.
• Respond promptly to your lender's request for documents.
Siegel said ideal loan applicants arrive at their initial appointment with all the primary documents they'll need, including recent pay stubs, W-2s and bank statements.
Mortgage officers are also pleased when loan applicants view their credit reports in advance of a meeting. Under federal law, you're entitled each year to one free credit report from the three large credit bureaus: Equifax, Experian and TransUnion. Just go to this website: www.annualcreditreport.com.
You may also want to access your credit scores. Such scores, which draw on data from credit bureaus, give lenders a measure of a person's credit risk. Most lenders use FICO scores, pioneered by Fair Isaac Corp.
Usually you need to pay a fee to obtain your credit scores. One approach is to buy these through the Fair Isaac website: www.myfico.com. You can also get scores through the credit bureaus. FICO scores range from 300 to 850.
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