Getting ready to look for a home? Planning to buy a home using a loan? If so then it is CRITICAL that you plan to be pre-qualified in advance of planning to actually go out and look for a property.
If you are a buyer who has had no problem in the past getting a loan, you may be in for a surprise in today’s 2010 market. Buyers who could get financing in 2006 and before are finding they may be completely shut out of the lending markets in 2010.
Typical Loan Requirements
Lately our lenders have been referencing the following as mandatory for buyers to be able to qualify for a loan.
- 720+ FICO score
- Verifiable and sustainable employment for the last two years (not self employed or an entrepreneur – see note below for those folks)
- 12+ months of mortgage payments in an immediately liquid account
- A minimum of 25% in reserves if planning on purchasing an investment property
- Two years experience as a landlord/property manager, if purchasing an investment property
- No late payments or foreclosures on real estate debts
Self – employed
If an entrepreneur, or self-employed, the requirements for income verification and tax returns categorically disqualify almost all of them from a loan, even with 800 FICO scores and 20% (or more) cash down.
Also note, that loans for non-USA citizens are pretty much non-existent in this current market. If you are a Canadian, or from another non-USA country, you will need to pay cash to buy a home in the USA.
And, anyone, whether USA or non-USA, if paying cash, must have a letter from a lending institution that states the person has access to immediately available liquid funds in excess of the amount the person plans to spend for the home. This is required before the buyer plans to go and look at properties.
While the lending market changes daily, these are pretty much the basic requirements that the lending world wants.
Oh sure, there may be some lender out in the world who will be promising a deal that sounds “too good to be be true” and won’t be asking for all these more demanding requirements to give a loan. But remember the old saying “if it sounds too good to be true, then maybe it is not true” — watch out for hidden costs.
Need a lender?
We can provide you with a list of our preferred lenders. No, its not mandatory that you use them, but if you have a lender of your own, we will want to speak with them and have contact information for them, so we can verify that a buyer is pre-qualified before you go to look at homes.
But note, there are some properties on the market that are bank owned that insist a buyer become pre-qualified with that particular bank/lender before the banks will look at any offer made on them. There is not a requirement to have to use the particular lender, but the buyer must go through the pre-qualification process with them, regardless of who the buyer ends up using.
Don’t have Credit Run Too Many Times
As a note, it is important for buyers not to spend a lot of time “shopping” the lending market on their own, willy nilly going from lender to lender and allowing their credit score to be pulled several times. Each time a credit score is pulled it is a slight “ding” on one’s credit score. Enough “dings” and a buyer who is on the edge of having a credit score that is high enough will not be able to get their loan. So shop wisely. This is why we prefer lender/ brokers who can shop the market for a buyer and find the best loan for them, with only running their credit a minimum number of times.
Getting financing nowadays is tough — if you are a would-be buyer and need a list of preferred lenders give us a call or drop us an e-mail.