When talking with buyers these days, I find there are three main issues that are on their mind:

  • Is there money available to lend for mortgages in these credit-starved times?
  • Can I get a loan with less than a 20% down payment?
  • Could I qualify for a loan with a credit (FICO) score less than 720?

The answer to all three is a resounding YES!!  Kenneth R. Harney of the Washington Post Writers Group recently wrote a great article that should dispel some of the anxieties currently held by home buyers. 

For example, there's plenty of money to lend right now largely because the mortgage market has been federalized with the Federal Housing Administration (FHA), Fannie Mae and Freddie Mac (the latter two are operating under federal conservatorship) being the central players.  All three have a direct pipeline to the global capital markets and their credit line is fully backed by the U.S. Treasury.

With the FHA option, you can still put down as little as 3% (3.5% come January 1st) and as little as 5% on certain Fannie and Freddie programs so long as you agree to insure the loans with private mortgage insurance (PMI).  While Fannie and Freddie have increased their lending requirements over the past year, they're still writing business with buyers whose credit scores are in the upper 660s.

I shall close with advice I give all my buyers when discussing their financing strategy:

  1. Get Pre-Approved (not Pre-Qualified)
  2. Do it now - When you find the home of your dreams, you'll want to be in a position to act on it immediately.  (In just about all cases, a pre-approval letter must accompany a written offer to purchase in addition to proof-of-funds for the down payment.)
  3. If you're pre-approved with a direct lender, get approved with a mortgage broker as well.  There are few (if any) funding guarantees out there and you want to have a Plan B in place to back you up in case the loan officer can't deliver at the eleventh hour.  A broker has access to multiple (hundreds of) lending sources that can keep your purchase effort on track.

It's challenging enough just to find the right home.  Having a sound strategy and plan of operation can best ensure that those efforts are not ultimately in vain.