Tips for Borrowers Shopping for a Loan

Home buyers in today's tight mortgage market need better everything to qualify for a mortgage with the best terms.

Here's what it takes to impress a lender:

1. Better credit. To get the same interest rate as just a month ago, borrowers need a credit score that's about 50 points higher, says Clay Edwards, a mortgage consultant and real estate specialist with the Fireside Mortgage network. Edwards says he's seen plenty of lenders reject an application for a $600,000 loan when the borrower's credit score was about 785.

2. Down payment. The market has all but evaporated for 100 percent financing. Most loans have at least 10 percent down, and lenders prefer 20 percent down.

3. The right lender. Using a high tech broker who can electronically distribute the borrower's application broadly can up the odds.

4. Income verification. Borrowers who can verify income can expect a long wait for a decision. Self-employed individuals can still get financing with verification, but may pay rates 1/2 to 1 percent higher.

5. Patience. Buyers should gather all the paperwork, look for backup, and then realize that they just have to wait.

Source: Dow Jones Business News (09/03/07)