Hopeful buyers who’ve worried they’ll never pass muster with a mortgage lender could be surprised by approval in 2018.
More than half of the 200 mortgage professionals polled recently predict that growth in first-time buyers will beat overall housing market growth next year, in part because financing rules are easing.
More mortgages requiring a down payment of just 3 percent of a home’s purchase price will be made, as well as loans to people with lower credit scores – 620 and higher –forecast the lenders, surveyed by Genworth Mortgage Insurance.
“While these loans are in fact widely available, not all potential homebuyers and borrowers are aware of them,” says John Clifford, Genworth senior vice president.
Still, a different hurdle, “actually finding that home,” still will prevail in 2018, says Keith Gumbinger, of mortgage data site HSH.com. “There’s just not a big inventory of homes on the market.”
Before the actual house hunt, most real estate agents usually ask buyers to visit a lender for pre-approval on how much they can borrow.
Seeing a lender early also is advisable. The two most readily available 3-percent-down-loan plans that are approved by government rule-making agencies Fannie Mae and Freddie Mac – the “HomeReady and“Home Possible” mortgages – may require that the borrower complete a homebuyer education course.
Moreover, while a borrower with a credit score between 580 and 620 might be able to receive an FHA-insured mortgage, “some lenders are leery of making these,” Gumbinger says.
Borrowers may want to shop a couple of different banks and/or mortgage brokers to see what they might qualify for – and the rate and fees on the loans. “Rates are higher when credit scores are lower,” Gumbinger says. “While a borrower with a 740 credit score might qualify for a four percent loan, someone with a 680 score might pay 4.5 percent.”
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