Need a Mortgage? There’s Still Hope

Credit standards have been getting tighter all year, reducing the number of people who qualify for loans. It’s hard to quantify how many people have been disqualified because of stricter lending standards, but mortgages are still available despite all the hoopla about the credit crunch.

Qualified borrowers can find conforming and Federal Housing Administration-insured mortgages easily. So-called jumbo mortgages are scarcer but are still available. The mortgage market isn’t frozen, at least in part because of federal intervention.

The one prominent change has to do with income documentation. A year or two ago, a borrower with an excellent credit history and no recent change in employment might have been able to refinance a mortgage without having to provide proof of income, even on a full-documentation loan. Those days are gone, mortgage lenders say. Be prepared to show W-2 forms or income-tax statements.

The market for jumbo mortgages has been in disarray for more than a year now, and it isn’t getting better. Jumbo rates are higher than rates on conforming loans (mortgages of $417,000 or less), and restrictions are increasing on these types of loans as well.

Mortgage-financing giants Fannie Mae and Freddie Mac have been adding restrictions, too. Before they were taken over by the federal government in early September, Fannie and Freddie had been on a months-long campaign of adding fees that were then passed along to borrowers either directly or through higher mortgage rates. The Fannie terminology for these fees is "loan-level price adjustment."

So, even though mortgages are now tougher to get than they used to be, there is still plenty of mortgage money available. The biggest kicker now is, you’ll have to prove you can afford a mortgage before a lender will just give you one.

Here’s a thought… what if it had been this way all along… would we be in the financial mess we’re in now?  What do you think?  We’d love to get your feedback on this.  Click the comment link below and sound off.

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