If you are trying to buy a home with a less than stellar credit rating or no money down, you better be sure of your financing! Housing values are falling, and 100% mortgages are falling out of favour. Lending practices are tightening and creditors in the subprime market are dropping like flies. In fact, the subprime sector is so depressed right now that bankrupt Century Financial is selling its loans for 30 cents on the dollar.
Here's where all this can affect you. It's getting harder and harder to get that higher-risk loan. As a result, people who are dreaming of a home of their own may be stuck renting. Unfortunately, with the right house at the right price, your rent could become your mortgage payment -- but only if you can convince a lender that you are a good risk. So, pre-approval for a mortgage could be more important than ever.
If you are on the edge of subprime - but close to prime - it also makes sense to do whatever you can to save a downpayment, or improve your credit rating.
If your credit rating is good and your biggest problem is a downpayment, you can also consider private mortgage insurance. It gets you into a home by reducing the risk to the lender. If you default, your insurance pays your lender for your mortgage, thereby protecting your lender from any potential financial problem on your part.
If you've got some downpayment but your credit rating is suffering, you've got to get it up over the magical 620 level. If you get above 620, you cease to be "subprime" and become "prime".
It's spring; there are lots of open houses to see! I know that I've been touring homes, in hopes of finding just the right place. If I do, I'll be ready to buy; I'm already pre-approved for a loan.
Michael Chantrel
