As housing prices rise lenders unveil new home loan programs to meet the needs of today’s homebuyer. We are seeing a major increase in home loan limits and a renewed focus on adjustable and interest only home loan products - an indication that lenders are shifting from refinance business to purchases. Lenders recognize that the relative price of a home has increased dramatically and certainly outpaced income increases over the same time period.
To make even a modest home affordable, home loans must accommodate this home price to income discrepancy by offering home loans with lower down payment and lower monthly payments. Although some may flinch at an interest only home loan, or 5 year fixed home loan, statistics indicate that between refinance and relocation, few people benefit from 30 year fixed rate loans. The real key for a homebuyer is getting in the home with affordable payments. As incomes rise, the home becomes relatively more affordable and the equity position improves giving rise to additional home loan options in time.
Another factor effecting today's homebuyer is the credit rating. Credit scores are becoming increasingly critical and the subscriber base (those that report to the bureau) grows daily. As a result many people (estimated at 70%) have some form of derogatory credit history due either to bureau mistake or their own inadvertence. The credit rating takes into account many factors but in essence the credit score is increased with good payment history and lowered with poor payment history. A derogatory credit history can cause a catch-22 when the individual cannot establish a good credit history because they do not qualify for conventional credit lines. Home loans programs are available for low credit ratings and regular payments greatly increase the credit score, thereby giving rise to additional home loan options in time.
Despite the increasing price, home ownership may still be within reach and considering the rate equity is growing, the time to buy may be now.
Source: Bad Credit Loans: You Can Be Approved For A Home Loan With Bad Credit (iGlobalFinancial.com)
