Monday, August 13, 2007

 

Credit .... now more than ever!

Everyone by now is aware of the crisis that has destroyed many secondary investors. As money disappears, so does many niche loan programs such as stated income, no doc, high loan to value and even home equity loans. Interest only loans may be the next casualty. Surviving loan programs have tightened credit requirements. Many loans now require reserves. The good news is loan applications are up sharply and we are approving loans.

The makeup of a loan ----

Loans are approved on three basic premises.

Income - debt ratio is a percentage of how much money you make vs. how much you owe. These ratios in the past few years were very liberal. Ratios are tightening. Fewer and fewer exceptions are being granted.

Loan to Value - how much your house is worth vs. what you owe. In other words, how much equity you have available. High loan to values are extremely hard to qualify for in todays market.

Credit - the big C... During the refi boom the past few years it was not uncommon to say a 580 credit score, assuming a lower loan to value and debt ratio, could get approved for financing - even 100% financing! Liberal lending is now a thing of the past. Credit is more important now than ever. Loans are no longer considered slam dunks based on a high credit score alone.

All three of these make up the characteristics of a loan but reserves are now becoming very important in the decision making. Underwriters are looking for three to six months mortgage payments tucked away just in case.

Consumers should are entitled to a free copy of their credit report from all three credit bureaus - Equifax, Trans Union and TRW. For information on how to contact these credit bureaus or for clarification of an existing credit report you have, call me. I am here to help!

Lewis Poretz

President 877-345-OPEN

Open Mortgage http://www.openmortgage.com/

Labels: credit

posted by Lewis Poretz  # 8/13/2007 08:16:00 AM

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