Mortgage rates in Northwest Indiana, and the United States as a whole, have dropped to their lowest levels since the 1940s, thanks to a trillion-dollar intervention by the federal government.

Yet the banks that once handed out home loans freely are imposing such stringent requirements that many homeowners who might want to refinance are effectively locked out.

The scarcity of credit not only hurts Indiana homeowners but also has broad economic repercussions at a time when consumer spending and employment are showing modest signs of improvement, hinting at a recovery after two years of recession.

The issue here is twofold.

First, many homeowners who have purchased in the last several years using high loan-to-value products such as 100%, 102%, 125%, 80-20, etc. loans) have seen their home values go down much faster than their principle has. For them, it is almost impossible to refinance if they own thousands, if not tens of thousands more than the current value. To make it worse, many of them are in adjustable rate products that could cause their payments to increase. For them, walking away may be an option. See previous post.

Second, it is estimated that 60% of those that are actively looking for a home may not qualify do to increased credit standards. Whereas a few years ago you could get a mortgage loan if you could steam up a mirror placed under your nose, the minimum scores are currently 620 and trending higher. If you are below this number, a 619 for instance, you will not qualify. Add a 30+ day late payment in the last 12 months or a new collection and you may be watching someone else move into your dream home.

My advice to those that are thinking about purchasing or refinancing in the immediate (or not so immediate) future… contact your loan professional now!

You really need someone to look at your credit report, as well as your income, debts, etc., to make sure that you will qualify. If not, there are options! For instance, 79% of all credit reports contain incorrect information and 25% have incorrect information that is significant enough to be rejected for a mortgage. If I cannot get you qualified, I have a nationwide credit restoration association that I work with that I can refer you to.

What if you are trying to refinance, but you are having credit issues and are behind on your home loan or have diminished family income and have been turned down? Maybe a loan modification is just what you need. The lenders are under a lot of government pressure to modify loans, but according to a recent report, about 45% of those in the process right now will fail because the borrowers fail to return all the necessary paperwork. I have a loan modification company that I refer to that will deal with the lenders for you and walk you through the process. It doesn’t get much easier…

The rates are currently at historical lows. Don’t miss the opportunity, as they are expected to start increasing in the next couple months. Also, remember the $8,000 / $6,500 new homebuyer / move-up homebuyer tax credits that require you to have your next purchase under contract by April 30, 2010 (it’s not that far away…).

Scott

Helping Families Into Homes, and Keeping Them There!