Tips for Getting Mortgage Loans in a Tight Economy
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by: marciafreeman
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The credit crunch has decreased applications for mortgage loans and made lenders skittish about approving new loans. Many people, both homeowners who want to refinance and new borrowers who want to buy their first house, think credit is so tight that there is no point to refinancing or to applying for a new mortgage loan. However, they may be missing out on a great opportunity. Now may be an excellent time to refinance or apply for a new mortgage.
Why? The Fed has drastically cut interest rates to stimulate economic growth, leading to substantially lower mortgage loans interest rates. That can mean a windfall for you in the form of lower monthly payments and a lower total cost for mortgage loans. If interest rates are now at least two percent lower than they were when you got your loan, now is the time to refinance.
But arent banks refusing to approve new mortgage loans? Yes and no. The key is the borrowers credit rating. Banks are leery of offering new loans to anyone with a bad credit rating (and guidelines for what constitutes a bad rating are more stringent now), but they are happy, even eager, to offer loans to people with good credit. Get a free credit report and discover what your credit rating is, and if it is good, then apply for a mortgage right away.
If your credit rating is slightly below the zone considered good, then there are a few simple steps you can take to raise it over the next six months. Pay all your bills on time scrupulously, putting them on automatic withdrawal if you can. The ratio of credit you have used to total credit you have available is important, so pay off as much as possible of your current loans and credit card balances. Do not close unused credit card accounts. Creditors were formerly advised to close unused accounts, but this advice is outdated, since leaving unused accounts open increases the amount of credit you have available and improves your ratio of available credit to used credit. Be especially wary of closing very old accounts, since doing so could shorten your credit history, which you want to be as long as possible. If you take these steps, pay on time for the next half year, and do not take on any new debts (credit card, car loan, etc.), then over the next several months you should see your credit score rise.
As you can see, a crisis in the credit markets can be the perfect time to refinance or to apply for new mortgage loans. Be the attractive would be mortgage holder the banks want to see, and you can get a markedly lower interest rate on mortgage loans. You can indeed turn a tight economy to your advantage. Find more Mortgage loan - Mortgage rate - Home loan rates - Mortgage refinancing - Mortgage calculator -
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