During the real estate boom, many first-time home buyers ignored government mortgage assistance, favoring instead the sub-prime, Alt-A and piggyback mortgages offered by private lenders who required little in the way of a credit score or, for that matter, money toward a down payment.
But now, thanks to the well-publicized sub-prime mortgage meltdown, the easy money is all dried up. Lenders have either significantly tightened their lending standards or have exited the market altogether.
The Latest in Lending Requirements
Compared to conventional (or private) mortgages, government-backed FHA mortgages seem a lot more forgiving these days. As a result of the ongoing credit crunch and the growing number of homeowners defaulting on mortgages, private lenders have tightened their lending requirements so severely that only those with the most pristine credit records and money on hand for a sizable down payment can qualify for a decent mortgage. Buyers who just a year ago needed a minimum credit score of only 620, for example, now must hit at least 720. And you can kiss the days of 0% down payments goodbye. To score a conventional mortgage, homeowners now need to put at least 20% down.
Yes, things have certainly changed. For first-time home buyers — who typically would lack a long credit history or the cash to make a sizable down payment — landing a mortgage with a below-average credit score or with anything under 20% down is now a thing of the past. ”We’ve gone back to the more traditional types of sources for assistance,” says Keith Gumbinger, a vice president at HSH Associates, a Pompton Plains, N.J.-based mortgage-information firm. “The traditional players are stepping up their roles and that includes the federal government and the states.”
*source AnnaMaria Andriotis, http://www.smartmoney.com/?hpadref=1
