Getting home loans was never as tough as it is today. However, knowing the hurdles you may face in getting these loans can make your work a lot easier and can guarantee your success for approval of the same.
When the situation gets tough everything gets tough. Well, the same applies to loans, the lending business and even the financial status of the individuals. If you are really wondering what we are talking about, you need to just look at a few years back only. The state of recession fuelled by the sub- prime crisis, triggered an atmosphere of uncertainty where people got fear for their financial security.
Lenders too suffered huge losses on account of non-payments and defaults by customers. There were several lenders and the credit card companies at prnewswire.com which suffered because of the bankruptcy filing and the foreclosures. The market had less buyers which deflated the cost of the properties and thus the foreclosed properties could not be sold by the banks and the lenders forcing them to bear heavy losses.
All this saw the lending norms of the lenders getting tough. Qualifying a loan was no longer an easy task for the borrowers. They had to complete a detailed process and the need for documentation rose to the higher levels. When it came to the approval of the home loans, getting them became all the more difficult. looking at the huge amounts involved in these loans and the losses suffered by the lenders in the past, these loans took a longer time to get approved.
However, for an individual buying a home in all and all cash transaction was never easy. There are almost 90% of the customers who still prefer taking a home loan to buy a house and are ready to fulfil the tough lending norms , no matter what it takes them.
Here are some points which prove to be a hurdle for people getting approval for home loan.
1) Higher credit score requirement: to get approval for home loan a borrower have to maintain perfect credit score for attaining best deal available in market. Although a little lower credit score can also help you to get approval for loan but higher interest rate and fees is charged by people who have a little low credit score. Every lender have minimum credit score criteria set which have to be maintain by borrower to get approval for loan. If in case a borrower don’t fit to the minimum criteria of credit score then he will face difficulties in getting approval for loan and if in case his loan get approved then he have to pay very high interest on the borrowed sum.
2) Greater scrutiny of income and asset: now a day’s lender has started verifying assets and income of borrower before lending them money for mortgage. This is because lenders want surety that borrower can repay the loan amount and this surety can be gained only when a borrower will prove that he can manage to pay off the loan amount easily and have an asset which he can pledge with lender as collateral against the loan amount.
3) Every changing borrower requirement: earlier lenders only use to look for a decent credit score to give approval for loan to buy any size house but now they have set many criteria’s for borrower to qualify for getting approval of loan. Now a borrower should have at least 700 credit score to get loan approval. If in case they get approval for loan at credit score less than 700 then they have to pay high interest amount on the borrowed sum. Even they should have total debt ratio below 36%, he also have to arrange for minimum 20% down payment and should have a stable job to get approval for loan.
4) Home appraisals are coming low: due to short sale of home the prices of real estate is going down day by day which has made home appraisals low. Now a days appraisals are completed by appraisers who are inexperienced and don’t know much about the market in which they are working. Because of all this all loan application are being rejected. This is because the interest rates are so low that lenders don’t lend money unnecessarily. For home buyer it is the best time to buy home as mortgage will be available to them with very less interest rates.
5) Fewer opportunities for small business owners and independent contractors: there is a loan which is named as liar loan in which there is no need of documentation to present in front of lender from borrower. By the help of this loan some borrower deceives their way to get mortgage which they were not getting because of their poor credit score. but these loans have proved to be very helpful loan for people who are self employed and who don’t get regular pay check so they can use t to show lender as a prove of their income to avail fiancé in future. This money is used by businessmen to pay themselves the minimum amount required too get rid of payroll taxes.
6) Condo purchases face additional tests: condo loans are the toughest loan which don’t get easily approved as other loans get easily approved. These loans are not easily approved and for people with bad credit score is impossible to get qualify for these loans even if they are ready to pay the highest interest rate which lender can charge against the total amount of loan.
So, just check out the hurdles and prepare yourself to cross them with ease.