According to an article in the Star Telegram changes are occurring in the mortgage industry that will make it tougher for homebuyers to make a new purchase.
- Buyers will no longer have access to down payment assistance from the seller.
- No more 100% financing. Buyers must now make a significant down payment before lenders will put their necks on the line. How much a buyer will be required to put down on a home will be determined by his/her credit score.
- Stated income loans no longer exist. You must now prove your income with tax returns.
- The good news is that the Housing and Economic Recovery Act of 2008 allows buyers to claim a $7,500 interest free loan from the government on homes purchased before June.
- 80/20 loans that allowed buyers 100% financing while bypassing mortgage insurance no longer exist.
The bottom-line is that it will be a lot tougher out there for buyers to get financing with small down payments especially if their credit is not stellar. Lenders are not just tightening their loans to banks; but they are also tightening credit access to individuals which is in turn putting downward pressure on the housing industry.