Thursday, October 9, 2008

The Credit Freeze - What Does It Mean?

We are getting many calls from real estate agents and borrowers asking about the "credit freeze" and how it affects someone's ability to qualify for a mortgage. A credit freeze exists when banks are unwilling to lend to each other because they don't trust each other. Their attitude is this: if I, as the owner of a bank, lend to you, the owner of a different bank, will you be able to pay me back? The answer for most banks is a resounding NO. They don't trust each other, so they won't lend money to each other.

However, that has no affect on their willingness to lend to individuals looking for mortgages. There are hundreds of different loan programs available, but the bottom line is this: if a buyer has a 580 credit score, has paid all their bills on time for the past year, and has 3% for a down payment, they will have very little problem getting a 30-year fixed-rate mortgage with no prepayment penalty for a primary residence. With a credit score below 580, it gets more difficult, but it's not impossible.

The loans available today are full doc loans - employment, income, and assets must be documented.

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