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Home Mortgage Loans: They're Increasingly Difficult to Obtain

In today's market some buyers are finding it is increasingly difficult to obtain home mortgage loans. The problem does not necessarily relate to credit problems or the inability to provide a down payment, although prospective homebuyers without good credit could find that it is increasingly difficult to obtain a mortgage. In the past when a home buyer without good credit wanted to purchase a home, they could do so with the expectation that they would need to pay a higher interest rate. Today, that is no longer necessarily the case. Prospective home buyers with credit scores lower than 700 discover they have trouble getting financing.

According to a report recently released by Gallup, one in five people know someone who has tried to get a home mortgage loan but has been turned down.

The issue at the heart of the current home mortgage crisis is tied to the fact that there is simply less money currently available for home mortgages. In particular, it is becoming increasingly difficult for borrowers who have small down payments, low credit scores and very little or no equity in the current homes to obtain a home mortgage.

Additionally, many lenders are also backing off on their willingness to make loans that are not backed by Freddie Mac or Fannie Mae; two government entities which purchase loans. Since these two entities cannot purchase jumbo mortgages it is also becoming more difficult for borrowers to obtain nonconforming loans, also known as jumbo loans.

These are mortgages that are over $417,000. While in some areas this is not much of a problem in other areas it is becoming a crisis, particularly in areas where average home prices tend to be quite high. In these areas a larger number of buyers simply must have jumbo loans in order to purchase a house because the home prices in their local area are quite high. In Florida, California and Florida this has become a serious issue.

Many borrowers are finding that even if they are considered to be an excellent loan candidate if their mortgage amount is above the limit set by Freddie Mac and Fannie Mae there could very well be a significant increase in the interest rate they are charged. Whereas in the past if you were not a prime borrower you could usually depend on paying a higher interest rate in order to get a loan, today if you are not a prime borrower, you may find that it is difficult to even get a loan.

It is not uncommon at all for jumbo loans to now carry interest rates ranging up to 8% if you can get one at all. This is 1.5% higher than rates offered just a short time ago.

Home buyers who are not able to make 20% home down payment are also feeling the crunch of the closing housing market. Once again, buyers who have good jobs and steady credit are finding that if they do not have that magic number for a down payment the ability to obtain a mortgage is becoming difficult.

Obtaining a second mortgage is also becoming more difficult.

It is not just small banks that are feeling the pressure either. Large banks are also experiencing problems related to the housing crunch. Profit margins have become quite small and as a result many banks have simply stopped offering a number of the loan programs they once made available. This has particularly proved to be the case with the riskier loan programs.

Considering the rapid rise of foreclosures across the nation many people feel the tighter restrictions are necessary in order to control a lending market that previously made loans available to borrowers who had poor credit, few assets or were unable to provide proof of their income.

As a result, many people who would have been able to qualify for a loan a short time ago, even a few weeks ago in some cases, are now finding they are no longer able to obtain a mortgage. In some cases, buyers may need to settle for less expensive homes but may still be able to obtain a loan. Some buyers may also find that while they can obtain a home mortgage it will be at the sacrifice of paying higher interest rates. In other cases, buyers may need to simply wait to buy.

In short, it is not true that mortgage money is no longer available, it just have become more difficult to attain. Mortgage qualifications are being more carefully examined and more documentation is required. You will have a better chance of getting a home mortgage if you have a good steady job, can prove your income, you can make a down payment of at least 20% and your credit is stellar.

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Quicken Loans Inc. is the nation’s largest online retail mortgage lender and among the five largest overall retail home lenders in the United States. The company closed a record $30 billion in retail home loan volume across all states in 2011. Quicken Loans ranked #1 in customer satisfaction among all home mortgage originators in the United States by J.D. Power and Associates in 2010 and 2011.

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