When the financial crisis hit, many banks became tightfisted, and plenty of potential borrowers walked away empty-handed. But financial institutions have emerged from the recession stronger and ready to lend. “Credit is available. No question about it,” says James Chessen, chief economist for the American Bankers Association. “Banks are being careful because the economy is still weak, but I don’t know a bank out there that’s not anxious to make a loan.”
Keep in mind that from mortgages to car loans, your credit history and score matter more than they did prior to the crunch. Rates are at rock-bottom levels for borrowers with top-tier credit — generally credit scores above 720.
Mortgage lenders want to make loans now, and they may even bid against one another for your business. But lending standards remain tight, and you must be prepared to produce a mound of paperwork to document your income and assets.
Rates are as low as they were in the 1950s, so going through the motions could pay off. In mid September, the average interest rate for a 30-year, fixed-rate conforming loan — a mortgage of $417,000 or less — was 4.5%, according to HSH Associates, a mortgage-tracking firm. The initial rate for a 5/1 adjustable-rate mortgage (a fixed rate for five years, followed by annual adjustments) was 3.6%.
Fannie Mae, Freddie Mac and the Federal Housing Administration continue to dominate the mortgage market, setting the standards for the loans that lenders make and sell to investors. So lenders strive to dot every i and cross every t when they qualify you.
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