Saturday, December 6, 2008

Yes Virginia, There Is Still Mortgage Money Available

One of the misconceptions that has resulted from the current credit crisis is the perception that there are no mortgages available to people who need them to buy houses. Nothing could be farther from the truth. Mortgage money is abundant and lenders are willing to lend to qualified applicants.

What has changed is what the profile of a qualified applicant looks like. Gone are the no documentation loans and most of the sub prime loans. Those are the loans you may have read about that are partly responsible for the soup we find ourselves in. Today a qualified applicant is someone who can verify that they have a job, can verify how much income they earn, have at least 10% of their own money to put toward a down payment and can prove it's their money and have credit scores at least in the upper 600's. If you fit that profile, you are likely to be a qualified applicant and mortgage money is available to you.

We do have a problem with loans to people who own their own businesses and their income is hard to verify. In the case of a business owner who isn't on a salary, the lender will rely on the tax returns of the applicant. If the business owner doesn't report all their income, they will not get as much of a mortgage as was the case when the funny money loans were widely available.

What has happened is that we have returned to the lending standards that served us so well before this decade. It's true that those standards do take a number of would be buyers out of the market, but in the long run, we will probably be the better for it.

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