Tips for Getting Mortgage Loans in a Tight Economy
View PDF | Print View
by: marciafreeman
Total views: 65
Word Count: 513
Because of the credit crunch, the number of applications for new mortgage loans has dropped, and lenders are wary of approving new loans. Many homeowners and would be homeowners think there is no point to applying for a new mortgage loan or trying to refinance an existing mortgage. However, right now might be an excellent time to apply for a new or refinanced mortgage.
Why is that? Because the Fed has attempted to stimulate economic growth with a series of rate cuts, leading lenders of mortgage loans to lower their interest rates as well. That can be excellent news for you, leading to much lower monthly payments and a lower overall cost for mortgage loans. If interest rates have dropped at least two percentage points between when you signed your mortgage and today, then now is the time to refinance and lock in a lower interest rate.
But arent banks leery of giving out new mortgage loans? Yes and no. The key is the borrowers credit rating. Banks are leery of offering new loans to anyone with a bad credit rating (and guidelines for what constitutes a bad rating are more stringent now), but they are happy, even eager, to offer loans to people with good credit. Get a free credit report and discover what your credit rating is, and if it is good, then apply for a mortgage right away.
If your credit is marginal, there are a few steps you can take to improve it within the next six months. Be absolutely scrupulous about paying all your bills on time, using automatic withdrawal as an "insurance policy" if you have the option. Because banks look at the ratio of credit available to you compared to credit you have used, pay down your credit cards and existing loans as far as you can. Do not close unused credit card accounts. Creditors were formerly advised to close unused accounts, but this advice is outdated, since leaving unused accounts open increases the amount of credit you have available and improves your ratio of available credit to used credit. Be especially careful not to close old accounts, since closing them may remove them from your credit report, shortening your credit history. You want as long a credit history as possible, in order to establish that you have been responsible with credit for a considerable time. If you take these steps, pay on time for the next half year, and do not take on any new debts (credit card, car loan, etc.), then over the next several months you should see your credit score rise.
As you can see, a credit crunch can be an ideal time to apply for new credit and new mortgage loans. Interest rates are dropping, so if you are the responsible credit user the banks want to lend to, negotiating new mortgage loans right now can lead to a much lower interest rate and substantial savings for you. You can indeed turn a tight economy to your advantage.
About the Author
For the real stuff on refinance home loan, go to www.getsmart.com.
Rating: Not yet rated