Wednesday, June 1st, 2016

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Mortgages May Prove Difficult to Get

Securing a mortgage may prove harder than many young people expect.Mortgage rates are near all-time lows – great news for young people looking to buy their first homes, right?

Not so fast.

According to a report released this week by real estate research site Zillow.com, would-be borrowers with less-than-stellar credit scores may be stymied if they try to apply for a home loan. Zillow, which has a mortgage-application portal called the Mortgage Marketplace, found that people with FICO scores of 620 or less did not qualify for the loans available on the marketplace.

And the lowest rates – the ones reported by the media – are generally only available to the 47 percent of people with FICO scores of 720 or above. Scores higher than 720 are deemed "excellent."

Young people who don't qualify for the lowest mortgage rates may still benefit from applying. Rates are so low that even a higher rate may be quite affordable, by historical standards – and loan programs like the one sponsored by the Federal Housing Administration can help first-time buyers get a loan with very little money down.

Still, a young homebuyer shouldn't expect to get the best rates out there – especially if he has a spotty credit history.

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One Response to Mortgages May Prove Difficult to Get

  1. Paul Petillo of Target2025.com says:

    That could be a blessing in disguise and a lesson in personal finance that your parents got once, promptly forgot and now are revisiting. Homes are still a “hole in the ground you throw money into” and even with the historically low rates available to, as you mentioned, those with the best credit scores, they may not be worth the effort. Except in the old-fashioned sense.

    Back in the day, a downpayment swayed many lenders to offer you a mortgage. To get a down payment, often 20% or more, you had to do well with your available cash flow. The choices were limited. As renters, you can imagine homeownership by creating a self-imposed rent increase based on twice what you are paying the landlord now. Can’t do it? Then you can’t afford a house. If you can, chances are you will have amassed a down payment within two years, learned to live within your budget and be forced to buy a house you can afford. If won’t be the house you want, but it will be yours.

    Renting is only bad if you spend every available dollar after the bills are paid. Renting should be a bargain because once you get a house, you’ll get a first class lesson in how to live cheap, appreciate a bargain and be thrifty.

    Paul Petillo of Target2025.com

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