Mortgage Rates Are Good If You Qualify

Apr 6th, 2009 @ 4:25 PM by Alden Smith

This is the time of year when people begin shopping for a home.  Interest rates have been dropping to recent lows, making it an ideal situation to refinance or to buy a home.  Even though these are good times to buy, if your credit is less than stellar, you are wasting your time.

Things aren’t like they were two years ago.  Then, if you were breathing, you qualified for a loan.  Lenders did everything they could to get you into your dream home.   Now,  you really need to show you have income, back it up with documentation, and have enough credit history to show that you can repay your loan.

Since the federal government’s efforts to bring down mortgage rates, people have been looking to the FHA for loans.  There is a lot of incentive to buy.  Rates on 30-year mortgages fell last week to the lowest on record.  They are down by more than a full percentage point from a year ago.  Freddie Mac said Thursday he that average 30-year fixed-rate mortgages dropped to 4.78%.  Now, the government is kicking in an $8,000 tax credit for first-time buyers on homes purchased before December 1.  This tax credit can be claimed on either 2008 or 2009 federal income tax returns.

But now things tend to get a little stickier.  People who qualified for a loan two years ago don’t stand a chance today.  To get a good deal on an interest-rate, your credit score had better be above 740.  A year ago it was 700.  Even for an FHA backed loan, you need a credit score of at least 620.

What I see here is a return to the way a home was bought a number of years ago.  Then, it was a straightforward deal.  You went to the banker with at least a 10% down payment, you had a good credit history, documented years of employment and the ability to repay.  Since banks and lending institutions took it upon themselves to get creative with financing, the troubles began.  It appears to me that we are back to square one.