Recent
signs of improvement in the housing market demonstrate that it’s steadily
rebounding. Home sales have increased, home price declines have tapered off and
inventory levels have dropped. The positive growth in the housing market can be
attributed to the homebuyer tax credit, more affordable home prices and
consistently low rates over the past year. Rates are expected to go up this
year, which will affect further development and the rate of recovery in the
housing market. Here is some important information to consider before getting a
mortgage this year:
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Tight lending standards. When the housing market bottomed out, the loans based
on minimal requirements became major losses for lenders. As more borrowers
defaulted on their loans, mortgage delinquency rates climbed. These more
unrestricting loans and the losses they caused continue to present challenges
for the housing market. As a result, lending standards will continue to
tighten.
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Stronger credit scores. In order to get the best mortgage rates, borrowers will
need a minimum FICO score and will need to verify income and assets. One way to
make sure that your credit score is as high as possible is to obtain your
credit report. Consumers are entitled to one free credit report from all three
major credit reporting bureaus each year.
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Higher down payment requirements. The tighter credit environment affects
consumers in multiple ways. Down payments on loans outside of the FHA will vary
depending on the market, the borrower and the property type.
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Changes with FHA-backed loans. The minimum down payment is 3.5 percent. New
requirements already announced by government—such as a higher minimum FICO
score, increased up-front cash requirements and higher insurance premiums—may
make it harder for some borrowers to obtain FHA-backed loans.
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Increase in mortgage rates. Continuous improvements in the economy could create
more demand for credit, which would cause rates to go up. Economic
improvements, in addition to concerns about inflation and other factors, will
push up mortgage rates.
Despite the changes taking place, with rates being at historic levels, now is
still an excellent time to purchase or refinance your home.
