Tips for Getting Mortgage Loans in a Tight Economy
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by: marciafreeman
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The credit crunch has made lenders wary of approving new mortgage loans, and has discouraged many would be borrowers from making applications. Many homeowners and would be homeowners think there is no point to applying for a new mortgage loan or trying to refinance an existing mortgage. However, now may be the best time of all to fill out an application for a new or refinanced mortgage.
Why? Because the Fed has attempted to stimulate economic growth with a series of rate cuts, leading lenders of mortgage loans to lower their interest rates as well. That can be good news for your pocketbook in the form of a much lower interest rate and its side effects, lower monthly payments and a lower total cost for all mortgage loans. If interest rates have dropped at least two percentage points between when you signed your mortgage and today, then now is the time to refinance and lock in a lower interest rate.
But arent banks leery of giving out new mortgage loans? Yes and no. The mortgage applicants credit rating is the deciding factor. Banks are leery of offering new loans to anyone with a bad credit rating (and guidelines for what constitutes a bad rating are more stringent now), but they are happy, even eager, to offer loans to people with good credit. Get a free credit report and discover what your credit rating is, and if it is good, then apply for a mortgage right away.
If your credit rating is slightly below the zone considered good, then there are a few simple steps you can take to raise it over the next six months. Pay all your bills on time scrupulously, putting them on automatic withdrawal if you can. Because banks look at the ratio of credit available to you compared to credit you have used, pay down your credit cards and existing loans as far as you can. Ignore old advice to close down unused credit card accounts; leaving the accounts open increases the amount of credit available to you, improving your ratio of available credit to used credit. Be especially careful not to close old accounts, since closing them may remove them from your credit report, shortening your credit history. You want as long a credit history as possible, in order to establish that you have been responsible with credit for a considerable time. If you take these steps, maintain your payments successfully for several months, and avoid taking on new credit card debt, in months your score should be markedly better.
As you can see, a credit crunch can be an ideal time to apply for new credit and new mortgage loans. Be the attractive would be mortgage holder the banks want to see, and you can get a markedly lower interest rate on mortgage loans. Even a tight economy can turn to your advantage.
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