November 7th, 2008
There is Still Money Available for Lending
There is still money available to be lent out, but in order to get it, people buying homes and businesses must have good credit or plenty of equity. Despite all of the talk surrounding the credit market which is supposedly completely frozen, it is still possible for consumers to pick up big ticket loans all over the Las Vegas Valley and elsewhere, provided that they can meet the terms which are much more stringent now.
According to a local branch manager for U.S. Mortgage of Nevada, nobody is going to offer 100 percent financing right now. If they did offer 100 percent financing, it would come with at least a 17 percent interest rate if not much higher. And if you want to take out a loan so that you can make a purchase of real estate for a company, you are going to be paying down a much greater share than if you were to buy that real state only twelve months prior.
Before granting a home mortgage to a consumer, Wells Fargo bank uses several different criteria that they examine for each of their loan applicants. These criteria include debt to income ratio, credit score, two years worth of W2 tax forms, two months worth of bank statements and payroll stubs. Just about anyone would have been able to get a loan two years ago, but today most lenders are being much more prudent in order to protect themselves.
A poor credit score is more than enough to doom an applicant, even when they have enough money to make a down payment. Major banks are rejecting mortgage applications from individuals with credit scores in the 500s, but by raising such a score to 650 or more, those individuals can suddenly qualify for Federal Housing Administration loans. Meeting new thresholds is absolutely essential if you want to obtain the lending that you need despite the credit crunch and the tighter reins that lenders are holding on their money.
Some lending institutions like Nevada Bank and Trust have taken truly black and white approaches to lending. Even people they know are reputable are losing out to hard line decisions because of how tough the credit market is right now. Small businesses used to easily secure loans of 80 percent or more of the total cost of real estate, but now the numbers are much lower, at 75 percent for owner occupied real estate, 70 percent for investor owned properties and even less for specialty operations. It isn’t just the banks that are playing it safe, but all lending institutions out there.
What it really boils down to is what your credit is like. If you have top tier credit, not even the credit crunch can bring you down. It’s all about having good credit and keeping your credit score up if you do not want to be negatively affected by the credit crunch.
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