Tight Credit Standards Halt Some Buyers

Lenders continue to reject borrowers with otherwise good credit when they diverge from the standard approval checklist.

Would-be borrowers facing the most problems include the self-employed.

One reason bankers are so nervous are the standards held out by Fannie Mae and Freddie Mac. Not only are Fannie and Freddie demanding credit scores above 720, they are refusing to buy back defaults when the original mortgage application had small discrepancies from the norm. To avoid losses, lenders are being extra careful.

The result is that some borrowers are being rejected for problems that seem completely inconsequential.

Source: The Wall Street Journal, James R. Hagerty and Nick Timiraos (07/10/10)

Tax Credit Extension Seems Likely

It seems likely that the U.S. Senate will approve a deal to extend the First-Time Homebuyer Tax Credit, but the devil is in the details.

Florida Democrat Sen. Bill Nelson told reporters traveling to Florida with President Obama on Monday that he thought that the extension would be approved, but both senators and representatives are among those who think that there should be some fiscal offset for the cost of the extension. Spending any more money on the stimulus effort also could stir up a hornets’ nest in some circles.

The proposal in the Senate that appears to have the most likelihood of passage would extend the $8,000 credit through March 31, then its value would drop by $2,000 for each of the subsequent three quarters of 2010. This plan was offered by Senate Majority Leader Harry Reid of Nevada and Senate Finance Committee Chairman Max Baucus, a Montana Democrat.

 Source: Associated Press, Andrew Taylor (10/26/2009) and The Wall Street Journal, John D. McKinnon (10/27/2009)

Advice to Buyers: Spend Cautiously Before Closing

Daily Real Estate News | November 12, 2007
Home buyers should take care not to run up a lot of debt between the time they are approved for a mortgage and the day they go to the closing table.

Many lenders are pulling credit history and credit scores within a week of a buyer’s scheduled closing date just to make sure nothing major has changed. What the lender doesn’t want to see is a huge run-up of credit-card debt or other loans.

The lender also may require the borrower to sign a statement at closing affirming that there has been no change in the borrower’s financial ability to repay the loan and that the borrower’s employment status remains the same.

Home buyers should be particularly cautious not to throw their debt ratio out of whack by buying things for the new home before they own it because the added debt might change their credit score and the lender may no longer be willing to lend them money at the rate promised, or maybe not at all.

The best advice, experts say, is to wait to do that shopping until after closing.

Source: Ilyce Glink, Real Estate Matters Syndicate (11/09/2007)