Qualifying for a home loan with poor credit
In a recent article from the New York Times, they reported that subprime loans accounted for around 15 percent of all new home loans in 2005 and 2006. That high of a percentage of high-risk loans is part of what caused the economic downtown a couple years later, and is what makes home loans so hard to qualify for today.
Most large banks are so afraid of losing money on a home mortgage, that they are requiring more from potential borrowers than ever before. Millions of potential homeowners who would have been more than qualified a few years ago cannot get a decent rate, or even get a loan at many major banks.
There are a few lenders that are moving back into offering subprime loans to help buyers get into homes, but things are still very different today. Many are now requiring larger down payments, usually at least 20 percent, and more documentation of income and ability to make payments. Long gone are the wildly adjustable rates and interest-only payments that plagued the market a few years ago.
Other options also exist for home buyers who do not meet the current requirements of a standard home mortgage, such as FHA loans. The FHA home loan program is offered to first-time home buyers who do not have perfect credit, and do not have a lot of money to put down. They typically require only 3.5 percent down and include monthly mortgage insurance, and can be had with a fixed rate. Major lenders such as loanDepot offer FHA loans with 15, 20 and 30 year term options.
It is definitely not as easy to qualify for a home loan as it was a few years ago, but new safeguards in place should help reduce risk and possible foreclosures in the future. As time goes on and the economy continues to improve, it is likely that we will see home loans get a little easier to qualify for.
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