America is experiencing a conjunction between very affordable home prices and historically low mortgage rates that hasn’t been seen for at least 50 years. Since nobody knows how long this will last, today’s market is a rare buying opportunity for working families with stable incomes and good credit.
Unfortunately, many of these families may be sitting on the sidelines, says Freddie Mac senior vice president Paul Mullings, because they are unsure about the new rules of the road for getting a mortgage. To qualify for an affordable conforming, conventional mortgage in today’s market, Mullings says borrowers should have:
• A stable income;
• A good credit history;
• A common-sense downpayment; generally about five percent for a conventional, conforming mortgage. (Fortunately there are downpayment programs for qualified borrowers.
• Documentation—responsible lenders today will want documentation verifying income (like W-2 forms, tax returns), employment, your latest credit reports, and assets such as bank statements to verify savings.
The lender must also obtain an impartial third-party appraisal complying with tough new rules to verify the house you want will secure the mortgage you need to buy it.
Borrowers still unsure about the new rules can ask a reputable lender to prequalify them for a mortgage. Think of a prequalification letter almost like a driver’s permit that can:
• Confirm you can qualify for a mortgage;
• Tell you how much you can expect to borrow;
• Make you a stronger home shopper since sellers won’t have to worry about whether you can qualify for a mortgage.
During the prequalification process, the lender will review your credit, financial and employment information after you fill out an application and provide documentation.
(There may be an application fee). While mortgage prequalifications are only good for a limited time, they are still worth getting. Even though you will need to apply for a mortgage once you find a house to buy, your prequalification letter helps clear the way by telling home sellers you’re road-tested for the most affordable mortgage market in 50 years.
Source: Freddie Mac
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