News

Getting a Mortgage in The Current Recession

We’ve all heard how the current real estate landscape is a buyer’s market. Interest rates are at historic lows and home prices have plummeted as sellers try to compete with a market flooded with foreclosures and sell-offs.

However, buyers hoping to take advantage of falling prices are finding it harder than anticipated to get funding, particularly here in Georgia.

The state of Georgia now has the highest number of bank failures in the country (over 20 since the FDIC started taking over banks last year). So what can you, as a Georgia resident, do to improve your chances of financing your dream home?

Well, first of all, make sure to check your credit rating with the three major credit bureaus before starting your home search. Banks are getting pickier about who they loan money to, and what used to be considered a workable credit score may not fly now.

You can contact the major credit bureaus directly at the following links, or use one of the many credit services out there. A word of warning, however: be sure to check the fine print when using these services. Many will sign you up for recurring charges you might not want or need.

Experian
Equifax
Transunion

If you spot discrepancies on your credit report, contact the reporting agency both in writing and on the phone to get the questionable information removed. The process can sometimes take weeks, so start your search early.

The second ting you can do to improve your chances for getting a mortgage loan it to get rid of excess expenditures. Banks and mortgage companies are looking closer than ever at applicants’ debt-income ratio. If you think you’re going to be in the market for a home, don’t make any major purchases that can hurt your chances. This includes automobiles, boats, furniture — anything that requires a long-term financial commitment.

And while you’re at it, make a concentrated effort to pay off the ones you already have, including credit cards. If you have credit cards with a zero balance, consider closing some of the accounts. Banks look at the potential as well as the actual when determining risk factors.

And finally, keep your expectations realistic. Don’t go looking at homes beyond your price range. You’re only setting yourself — and the prospective seller — up for disappointment.

CNN Money has a handy formula for determining how much home you can afford. Find it here.