The Many Changes in the Lending Industry as a Result of the Credit Crisis

Purchasing an Atlanta-area home may be a far different experience than it was just a couple years ago.

If you purchased a home in Atlanta – or virtually any other part of the country, for that matter – during the height of the housing and credit boom, you will likely have breezed right through the loan application process.

As a result of government-encouraged incentives, lenders developed a myriad of loan programs to put homeowners into homes – some of which they simply could not have afforded otherwise.

We are all more than aware of the result of these loan programs and the havoc it wreaked on our nation. As a result, banks have switched gears entirely; in fact, the good majority of individuals in the United States can no longer breeze through a loan application for a mortgage.

Changes in the Lending Industry that may Affect you when Purchasing a Home:

•           Traditional loan programs rule. If you are looking for one of the trendy loan programs of years past, you may be out of luck. No-doc loans, subprime loans and interest-only loans are now, for the most part, a thing of the past, and have been replaced with more traditional loan programs.

What does this mean for you? Traditional loans generally consist of 15 to 30-year loans with a hefty down payment (about 20 percent). These loans also require documentation regarding your debts, your income and your credit.

•           Competitive Loan Rates are now the Name of the Game. Those looking to purchase or refinance will likely experience excellent, competitive interest rates, provided they have the credit to back it up. Interest rates are now at near-historic lows, so this is certainly a prime opportunity for those with excellent credit.

•           Down payments are required – so start saving now! Many of the alternative loan programs required very little – if any – down payment monies, but that went away as quickly as the easy credit. Expect to have at least 20 percent down of the purchase price of a home, maybe more, depending on the lender’s requirements.

•           Pay attention to your credit rating – very close attention. Your FICO score, or your credit rating, dictates your ability to obtain credit, now more than ever. The best way to keep an eye on your credit rating is by ordering a copy of your credit report from all three credit reporting agencies, and examining it with a fine-tooth comb, so to speak. Quickly alert the credit reporting agency to any discrepancies or errors, and make a point of clearing up any past credit mistakes.

You can raise your FICO score by paying off credit card debt, by always making the payments on your monthly bills (in time and in full), and by keeping your debt-to-income ratio at a reasonable level. Don’t forget that many things come into play regarding your FICO score. Even your utility bills can come back to haunt you if you’ve failed to pay them on time.

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