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Wednesday, March 11, 2009

Attacked man rues police response

A man who was attacked by youths says he is "disappointed" that it took media coverage for police to take him seriously.

What is going on with the U.S. economy right now, and how does it affect people who are trying to get a mortgage and buy a home? This article will give you a better understanding of the economic problems in this country, and how they affect home buyers.

For one thing, it means you will need a better credit score to (A) qualify for a home loan and (B) get the best rate on that loan. Tougher regulations were put in place as a result of the housing crisis, and these regulations do what should have been done years ago -- they discourage banks from lending to people with bad credit (among other things).

On top of that, we are seeing financial institutions fail because of all the bad loans they made in the past. So banks today are a lot less inclined to make what they feel is a risky loan.

Let's assign some actual numbers to this explanation so it makes more sense:

I recently saw Jean Chatzky, the financial editor for the Today Show, describing how the housing crisis has affected borrowers, in terms of their credit scores. She explained something we have already talked about. Home buyers today need better / higher credit scores to qualify for mortgage loans. She then backed this up with numbers that were derived from polls of the lending industry.

* In May of 2006, a borrower needed a credit score of 620 or above to qualify for the best interest rates on a mortgage.

* Two years later, after the housing crisis and all of its fallout, borrowers would need a score of 760 or above to qualify for the best rates.

That's a significant change, and it shows you how this issue affects buyers who need mortgage loans. The bottom line is that banks are not taking any risks with subprime loans or borrowers with bad credit these days. As a result of the housing crisis, the bar for mortgage qualification has been raised.

What Can You Do?

I frequently get emails from people who say something like this: "I have bad credit but I want to buy a home. How should I go about it?" In other words, these people are asking how to get a subprime loan. Evidently, they do not watch or read the news.

My response to such questions is always the same -- don't do it! Buying a home with bad credit is virtually impossible right now. And even if it were possible, it would be the worst financial move you could make in this economy.

People with bad credit should "hunker down" and focus on improving their credit scores before they do anything else. Wait until the housing market shows signs of recovery. Wait until you have the kind of credit score that will allow you to qualify for a loan, and to get a decent interest rate on that loan.

Brandon Cornett is the creator of the Modern Real Estate Guide, a website that helps home buyers makes sense of the current housing market. You can learn more about credit scores, mortgage rates and similar topics by visiting http://www.armingyourfarming.com/articles

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