Housing prices are still going low and most of us are thinking that it would be the best time to buy the dream home in 2010. With the extension and expansion of first time homebuyer's tax credit, things have become easier for most of us. However, before you decide to apply for a mortgage in 2010, here are 5 things you need to know:
Tighter lending rules: The first time homebuyer's tax credit has been extended by the government and more people are looking forward to buy a home. However, it's expected that the lending rules will remain tighter throughout 2010. After the real estate crisis took place, lenders have become extremely cautious. There are hardly any loans available without down payment. Moreover, no-doc loans have also become obsolete these days.
Credit score: In order to get best mortgage rates, especially for conventional loans, you would require a credit score of at least 620. The lenders would ask you for documents supporting your income and other assets. Check your credit reports on a regular basis to know if any unnecessary negative item is mentioned in it. If you find such an item, take steps to remove it. You can get a free credit report once in a year from annualcreditreport.com.
Down payment: Presently FHA loans require a down payment of 3.5% and conventional loans would require at least 20% down. Making a down payment will help you get better interest rates. Also, you must understand that if you're unable to pay the required down payment, you will have to go for private mortgage insurance.
FHA loans: It is true that lending requirements have become tight due to the ongoing crisis in the real estate market. However, FHA loans can help borrowers who are unable to meet the strict lending criteria. Borrowers can get a FHA loan with a credit score of 620-630. The down payment requirement, as mentioned earlier, is 3.5%. However, there shouldn't be too much of negative items on your credit report.
Jumbo mortgages: In the last week of November, 2009, the jumbo mortgages were available at an interest rate of 5.88%. Thus, rates are quite attractive. It is expected that the jumbo mortgage rates would remain historically low throughout 2010. You may apply for a jumbo mortgage provided you have an exceptionally well credit report with hardly any negative items on it. Also, you would require a down payment of around 30%-40% in order to get a jumbo loan.