Should you be worried about the failure of the “bailout bill” ? Does it make you think that it may be harder to obtain that home, auto or electronic store loan? Yes, folks it should but we are all going to be just fine. The credit crisis has caused banks to define strict lending standards which means it will be harder for you and I to get the credit we need. That doesn’t mean however that it is impossible to borrow money.
If you’re somebody with excellent credit, you’re in a good position to borrow money.
What we need to do though is be smart to find the money you need at a price that works to your benefit. Here is the real deal: standards are back. Lenders are not going to lend $ to people who can’t prove they can comfortably pay it back.
So what should you do if you are looking to get a home or auto loan?
1. Make sure your credit report is clean, free of errors and your credit score—as measured by Fair Isaac Corp.—is at least 720. Want a free credit report, simply got to annualcreditreport.com and your credit score (for $16) at myfico.com.
2. What if your score is below the 720 watermark or there are errors on the report? Well, start fixing them before you start looking for that new home or pay a visit to the local car dealership. Pay down credit-card balances and make sure you pay your bills on time.
3. Search hard for the loan that fits your needs. Even with interest rates that have moved up slightly during the recent tumultuous weeks in the market, today’s rates may seem low compared to what they will look like in the future, once the economy recovers, while the government continues to borrow trillions of dollars to cover its own expenses. Home loans are still hovering at around the 6% interest rate mark, which is down over half a point from just a few months ago.
The big bailout, which in my opinion will ultimately pass more than likely won’t prevent recession, which many economists feel we are already in, but a new loan makes a lot of sense for someone seeking to refinance a bad loan, buy their first house at a nice price they’ve been planning on for a while.
If you are looking for a home, which I hope you are, the timing is right.
Mortgages with borrowers seeking less than $417,000—the Fannie Mae/Freddie Mac limit in most housing markets—will not have trouble finding loans. My suggestion is to look at the local banks, Athens First, Brand Bank your local credit union and others. They may be in a great position to offer the best rates. If you want to go with a big guy, go for it.
Can you slide into that new loan with no money down? NO, expect to be asked for a down payment of at least 5 percent and prove that you can cover all of your monthly debt payments with about 40 percent of your pre-tax income.
Larger loans, over the $417,000 called Jumbo loans will have a tougher time getting financed but they still are being done.
So what does this all mean. I think we are heading out of a pretty nasty time and we all have been dealt a serious blow to our financial well being. However, there is light at the end of the tunnel and I am not giving up and neither should you.
As it relates to real estate: There has really never been a better time to purchase investment property. If you are one of those that has excellent credit and can get a loan, take a hard look at selling your current home and purchasing one of the “Deals” in your area. What better way to increase your net worth than buying property when the market is down.
Now, let’s go make this economy work and make it a great day.
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