Tighten Up Loan Applications

Last Friday, Bear Stern’s two sub-prime hedge funds filed bankruptcy protection. Today, All American Mortgage Company declares joining the list. The sub-prime mortgage situation are far from over yet.
Meanwhile, Wells Fargo and all other major banks have announced measures to tighten the application process of getting purchase loans.
To sum up the major banks loan application basics:
1. You must have good credit history. (A good credit score is just not enough).
2. Must be able to provide more documents. (More paper works)
3. Must show constant, regular income.

Getting loans will be more difficult. About two-years ago, it seemed that anybody can walk in to bank and buy a house and did not have to pay a dime. – Money was too easy, too much then. But no more Santa Clause aids. The buyers must have their own reserves and qualifications.

More down payment requirements. The more, the better. I see the old tradition 20% down rule will be enforced by all lenders.

I also always consult my clients to write down truthfully of what he earns monthly when they apply the loans. Why would anyone lie to get money but cannot afford to pay the bills afterward. To own a house is everyone’s dream in America, but there’s no need to jump into the bandwagon if one simply just cannot afford to. Ask yourself: Will you sleep well at night?

Besides affordabilities, I often advise my clients to keep a simple life, your credit score/history are the most important finance shield: Don’t load up all your credit cards and just pay minimum payment monthly. Don’t delay any mortgage, rent payments in any circumstances. Don’t live a life that you cannot afford. – I am 200% with Suze Orman in this area, she’s an icon of reference and resource in money.
A good, clean credit score and history are anything but everything that a lender will examine when you first apply.

Have limited fund for down payment, and a so-so credit score. One can still get loan, but just be careful. Fixed rate loans are more reliable, ARMs will only give you periods of steadiness, but if you don’t intend to own for a long time, ARMs will save money. There are still many kinds of loans out there and suit for different people on different conditions. Lenders are being more cautious now because they do not want to have a delinquent loan afterwards.

If you have any questions from sub-prime loans, and the loan application process, please check out my web site or give me a call, I can answer all your questions.


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