How to get a loan in a tight credit market.

While there is home financing available for people with good credit, the options are fewer if your credit score is less than stellar.  If someone has a credit score below 680, they will pay more private mortgage insurance on loans above 80 percent LTV.  Below 620 it's going to be extremely difficult. Mortgage insurance companies that typically do loans for people with lower credit scores aren't offering it without extremely high monthly premiums. If the client has face-to-face counseling, most mortgage insurance companies will lower the cost of private mortgage insurance by half or two-thirds."

• Homebuyers should interview lenders like they do when shopping for a car. Ask, what are your estimated closing costs? What is your PMI rate if I have a score that is 645? How can I lower that cost?
• Making a larger downpayment can help. A loan with just 97 LTV requires considerable private mortgage insurance. Below 95 percent LTV, you can get a break and an 80 percent LTV loan is even better, until recently requiring no PMI at all. But the downpayment is not the only criteria for PMI. Credit scores below 680 will now cost more than two years ago. Many lenders including the USDA Rural Development's Guaranteed loan are now requiring a minimum credit score of 660.
• Look at your credit prior to shopping for a home. Every year you can get a free credit report at http://lyris.illinoisrealtor.org:81/t/72840/3043783/673/0 from three repositories: Experian, TransUnion and Equifax.
• It is your responsibility to know where you stand with your credit and to seek counseling to clean up a credit report. The U.S. Department of Housing and Urban Development has a list of counselors on its site, http://lyris.illinoisrealtor.org:81/t/72840/3043783/732/0.

About the author: 

Cheryl Bowers is a Chicagoland Area Residential Real Estate Expert, who can assist you with the purchase and/or sale of real estate in Plainfield, Naperville, Aurora Illinois or any place in the country. Cheryl has created a team of professionals throughout the Chicago suburbs to ensure that you enjoy a smooth transition to your new area. Please visit http://www.cherylbowers.com/ for your real estate needs.  Please give me a call if you have questions about the Plainfield, Naperville, and Aurora real estate market.

Cheryl Bowers, REALTOR® (630) 712-1921

(Copyright © 2008 By Cheryl Bowers, Realtor. All Rights Reserved.)