Home mortgages didn’t used to have such a high down payment. Back in the late 2000′s we say the heyday of the 0% down loan. It was not uncommon for people to just put down 2-5%.

But, then all of a sudden things changed. And if you’ve been around in the last 5 years, it’s easy to see why. Does the term Mortgage meltdown ring any bells?

Well, since the subprime loan debacle, and all of the bad loans out there, lending standards have gotten tighter… should I go as far as say waaaay tighter.

I’ve heard of 40% downpayment with a minimum 750 credit score to get the best interest rates.

For the average, however… I’m seeing a 20% downpayment needed.

The Effects of a 20% down payment Requirement from Potential Homebuyers

Future homebuyers may be required to put a 20% down payment according to the newly proposed rules. The purpose of this is to prevent another possible financial breakdown.

The rules that are being proposed are ways to put into effect the Dodd-Frank Wall Street Reform and Consumer Protection Act launched in the U.S Congress in the past year. One of the many rules are to ask for a 20% down payment in order to ensure that the home loans being sold by the banks in the secondary market are safe, said Robert Fletcher, the Ohio Association of Realtor’s executive officer.

Fletcher said that implementing the rule on the 20% down payment will disqualify 60% of potential homebuyers. Since the housing market plays a main role in the economy, removing buyers considered as low risk from the housing market will be a big hindrance to the recovery of the economy, added Fletcher.

In Greater Cincinnati, the average price of houses is at $151,080. With the proposed rules, this will require about $30,216 down payment excluding closing costs. This amount is more than the average price of most brand new cars that consumers can afford.

The purpose of the risk retention requirements like the 20% down payment is to address the challenges in the residential, commercial and loan markets. It seeks to provide a solution to their problems by asking the organizations that are selling securities to maintain an economic interest in the credit risks of their combined and sold assets, according to the rules proposed by the regulating agencies.

Aside from shooing away potential buyers to the housing market, another effect of a 20% down payment requirement on home purchases is that more and more people could not afford to buy a home. It may also cause banks to become less willing to let the consumers take a loan for a more affordable cost. Overall, it will reduce the housing demand, cut house prices and eventually hurt the industry of home building.

On top of the down payment requirement, the proposed rule may also ask the homebuyer to provide a credit history, a proof of income and a documentation showing that the down payment source is valid.

Based on this, you can expect that lending standards are going to remain high for quite some time. If you are looking to buy a house, then you are going to need to make sure you have money to put down, and you will need the credit score to support your purchase.

Could you afford to pay a 10-20% down payment on your home? from CRA NC on Vimeo.

Credit Score Requirements are Now Stricter for Homebuyers

Recent data shows that getting the best terms for a mortgage loan needs more than just excellent credit. Today, only individuals and families with exemplary credit standing can benefit from the historically low interest rates of 30 year mortgages.

The Mortgage Bankers Association reports in the Mortgage News Daily that about half of the newly written mortgage loans during the first quarter of the current year were given to consumers with credit scores that are higher than 750.

On the contrary, only up to one-third of the new loans in 2008’s third quarter, the period before the credit crisis started, were given to consumers with greater than 750 credit scores. FICO scores, the term referring to credit cards, is the basis of most lenders in the mortgage terms that they issue to the consumers. Scores usually range from 300 to 850. In the past, having a score of at least 720 is enough to obtain the best terms for mortgage loans.

At present, consumers who are at the lower end of the credit score range have a tougher time in getting a mortgage approval, according to the Mortgage Bankers Association’s recent data. The scores that used to easily qualify for mortgage loans are now making majority of the lenders contemplate. Actually, less than one out of ten loans, about 9%, were given to aspiring homeowners with below than 650 points credit standing, reported the Mortgage News Daily.
Experts say that the changes in the requirements of the FICO score is part of the consequences caused by the credit crisis that started in 2008 and the resulting decline of the economy.

Michael Rubin, the author of Beyond Paycheck to Paycheck: A Conversation about Income, Wealth and the Steps in Between, says that there has been a significant shift in mindset which is why banks are not very willing to take the risk anymore. He further added that most banks were not very careful until the second half of the year 2008. During that time, they were very much focused on lending.

Today, banks have changed strategies by being careful with their borrowers. They are now very keen in screening their consumers because they want to make sure that they will be repaid.

In the world of credit scores, 850 is the lucky number and the perfect score. This is clearly not a result of accidents. This is not just achieved by making timely payments of bills. This requires strong determination and dedication to increase a credit score, the knowledge on how to increase it and the time. Here is a personal experience of a 23 year old associate who was able to obtain this excellent score.

Joshua Duvachelle, an associate editor of a nonprofit organization takes pride of his 736 credit score. At this very young age, he attributes this achievement to the way his parents raised him. That is, to be a person who practices strong work ethics and someone who knows how to save beginning at an early age. He shares having seen the way his parents enjoyed abundance and suffered scarcity. This led him to build a strong foundation for his financial future.

He took his knowledge of building good credit from working on full-time credit projects. He also studies financial magazines. At age 18, he opened his own credit card. Currently, he checks his scores monthly by subscribing to any of the three credit bureaus. Annually, he also obtains a free report from these three reporting agencies. Experian, Trans Union, and Equifax are the main reporting entities.

Mr. Duvachelle boasts of having a perfect history of payments. Through all these time, he experienced having an incorrectly sent account but he gave time to dispute it for many months until it was fixed. Even his student loan that amounted to $15,000 was all paid down until the last few amounts of the loan. This unpaid amount was purposely done to maintain an installment form of debt which credit bureaus consider in giving a high score. Aside from this, Duvachelle spends only about 30 to 40% of the total limit in his credit cards. He knows that this is the maximum amount he can consume to maintain his credit rating.

Expenditures that will exceed 40% of the credit limit will cause a decline in the credit score.
From this personal experience, it is easy to point out the factors that contribute to a good credit standing. This include proper financial management, constant checking of one’s credit reports, disputing errors, making timely payments, creating a perfect payment history, paying down debts, maintaining different types of loans and limiting credit card usage to a maximum of 40%.

More Credit Score Resources:

www.myfico.com/crediteducation/creditscores.aspx

www.nytimes.com/…/credit-scores/primerscores.html

What is the Perfect Way to Acquire a Car for People with Bad Credit?

There are some distinct ways of obtaining a car for people with bad credit. Some tend to be better than others, however in all justness; I’ll cover the fundamentals of each for your consideration. Hopefully, this short write-up will help you along your way to obtaining a automobile on reasonable terms.

Acquire Here, Pay Here Financing – Whenever you have bad credit and want an automobile, you have two targets. The first is to obtain a loan approval. The second, is through fixing your credit. Acquire here, pay here loans covers the initial objective of acquiring financing, but doesn’t fulfill the second objective of rebuilding your credit history. Dealers that finance in-house don’t review your payment history to the significant credit reporting agencies, as they aren’t truly a “financial institution”. They fall under more of a “rent to own cars” category. This could not be the best way to purchase a car with bad credit.

Local Credit Unions – Depending on the harshness of your credit problems maybe a good alternative. If you’re a user of a Credit Union through your job or social membership, you may have the chances within your favor.

Local Banks – Not the perfect way to buy a car with poor credit, but if you have a “connection” with a local banker then you may be able to acquire some strings pulled within your favor, as they say.

On-line Services – A much more novel method that’s gathering popularity is on-line loan companies and loan matching services. This is the very best method of getting a car with bad credit and there are a few reasons why. There are web sites that could match you with a loan company, based upon your credit ratings. Having a database of providers, this may possibly be the most suitable way of seeing what you can qualify for and acquire an agreement that will help you to rebuild your credit rating with competitive terms. Some offer financing with small to no money down, with lenders that look at your ability to pay back that loan, rather than just your credit score.

What are the Ideal Credit Cards for People with Bad Credit?

People with a bad credit rating are keen to comprehend what are the ideal credit cards for people with bad credit. Yes, you’ll find credit cards for people with a bad credit score some help people to rebuild bad credit with credit cards meant for individuals who do not enjoy an excellent credit history.

Challenges of Poor Credit – it’s highly recommended not to make purchases beyond your paying capability. On particular occasions, you may not be in a position to pay back the amount due in a timely manner and such situations could lead you to a situation where your credit score is negatively affected. Some of the possible motives leading to bad credit and lower credit rating could be loosing an occupation, reducing your wages, making heavy purchases beyond your paying capacity, taking on heavy medical fees, having court cases and many others.

Credit Cards Alternatives for Individuals with Poor Credit – having a bad credit isn’t the finale of the road for you due to the fact that numerous organizations have credit cards for people with bad credit. These credit cards not only help you in having credit card for your use but also help to create credit with credit cards for this specific purpose. You can find some downsides for credit cards for individuals with poor credit.

These cards are generally expensive and have a higher APR in comparison with typical credit cards. When applying for a new credit card with bad credit you ought to expect to be given a diverse treatment than usually given to individuals with good credit in the form of being charged higher annual fee, enrolment fee, and etc.

In such scenarios it’s required that weigh all the alternatives obtainable for best credit cards for poor credit and get a credit card low charge poor credit alternative. Yes, the competition among credit providers has released low fee credit cards for individuals with poor credit rating. Just before getting bad credit credit card scrutinize the terms and conditions along with it. Applying for credit cards for folks with credit means that you will be reported to diverse credit card firms.

Judicious Use of Credit Card – once you get the bad credit credit card you have to use it judiciously to rebuild your credit since should you try to get a residence loan or auto loan or any other loan, your credit history plays an essential role in securing the loan. Eventually, poor credit cards help to rebuild credit with credit cards.

By utilizing the card judiciously and paying all the dues on time use can rebuild your poor credit. You must understand that no creditor would like to give credit to a person having poor credit. You need to be absolutely careful in not exceeding the credit limit, pay the bills on time otherwise you wind up paying a lot more than the needed amount. Yet another way of knowing about your bad credit is to keep a vigil on your transactions by getting the credit report.