What Should People Shopping for a Mortgage Do?
The main problem for home buyers who want to buy a home with a low down payment FHA loan is when they have under-660 middle credit scores. With unemployment rates rising at record levels, lenders, including banks, started to lessen any perceived risk with low down payment loans by raising the minimum credit score to 640 or 660 on FHA, VA and conventional loans.
Fortunately, some mortgage brokers are still able to get you approved for an FHA or traditional loan with credit scores from 620 to 640.
As forbearance requests begin to increase with the economic shutdown, the pressure on the mortgage industry magnified even more. As of May 10th, states have begun re-opening businesses with conditions so it’s not known when the country will go back to the way of life before the coronavirus.
“In previous down cycles, and right after the last 2008 crash, consumer and employer confidence recovered from one to one and a half years. Of course the current events are extraordinary, and there is not anything concrete as to how the markets will react.”
What happens next depends on your financial position and how sound your job position and industry are. Those who feel their job is less secure or were furloughed or laid off may need to delay their plans to buying a home until the economy and unemployment rate starts descending.
Many self-employed loans without tax returns have raised their credit score minimums to 680 for just 65% financing. If you have a 720 or 760 middle FICO score, then you may be eligible for 80-percent financing on a single family home as a primary residence.
If the coronavirus hasn’t damaged your financial position, this could be the right time to boost your credit score and come in with a larger down payment. You would be an ideal borrower with a high credit score and secure job.
There are lenders who will work with you and offer a competitive mortgage interest rate when your financial picture is strong. All that’s required is a little shopping around.