Recent Economic Changes-
* May 2006 - Borrowers needed a credit score of 620 to get the best rates.
* APRIL 2009 - Borrowers need a credit score of 620 or above to get ANY rates.
That's a significant difference.
Credit has always been important when buying a house and applying for a mortgage loan, but today it's more important than ever. To fully understand the reasons for this, we need to look back over recent economic changes.
The subprime mortgage "meltdown" that started in 2007 caused widespread economic changes that we are still seeing today in 2009. Many lending institutions went out of business, and thousands of Americans lost their homes due to foreclosure. This caused a general tightening of credit that affected consumers and businesses alike.
The home buyers of today need better credit than the buyers of, say, three or four years ago. The federal government is putting more pressure on lenders. The mortgage lenders are scrutinizing borrowers. And borrowers are under increased pressure to have good credit scores to qualify for loans.
What It Means for Home Buying
If you are planning to buy a home in the near future, this has everything to do with you. As a result of these and other factors, the process of buying a house in today's market is more challenging. If your credit is good, there's PLENTY of inventory out there to choose from so it shouldn't be hard to find the house of your dreams at a price you can afford.
However, buyers with bad credit have fewer options today, because the subprime mortgage is practically extinct. This makes financial responsibility all the more important for buyers in the modern economy.
My Advice to Buyers
...in todays market or ANY market is this:
Do not buy a home unless your financial "house" is in order.
Pay all of your bills on time.
Minimize your debt.
And start saving money – for all that new furniture in your new home!