Credit Worthiness

Credit Worthiness is a term used to indicate if a person is capable of obtaining, or worthy to get, a loan. There are several factors that play into a bank being willing to loan a person money. The process has tightened dramatically in the last few years. Some people say that the entire housing crisis and subsequent drop in the real estate market was a result of poor lending practices. Many people were allowed to get loans, and for higher amounts than previously allowed. These loans were granted according to new government outlines.

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Housing Bubble

This increase in people that were able to buy houses created a balloon, or a bubble effect. This led to houses increasing to many times their actual values. When the inevitable happened, and people could no longer afford the houses they purchased, the market was flooded with millions of dollars vacant over priced houses.  As a  result of this bubble bursting there was a housing price correction. Real estate values plummeted everywhere. Banks and lending institutions across the country were left with over priced houses, and loans that would not be paid back. It has taken our great country many years to work out of this housing crisis. Prices, and real estate values are nearing, or back to, pre-bubble days. The current growth in the real estate market seems to be more sustainable than the growth leading to the mess we were previously in. Leading real estate economist, believe this year will continue to enjoy fairly good price increases, with prices leveling out in the next two to three years.

Now What?

The result of these problems mentioned are a series of new lending and appraisal practices. A person wanting to get a loan, now has increased scrutiny and more hoops to jump through. We have included guidelines courtesy of Patriot Mortgage. Unfortunately many people have damaged or destroyed their credit as a result of the real estate crash and associated problems. The attached link might be helpful in determining a home buyers credit worthiness.

2013 Realtor Booklet-quick guide copy

It is a good idea to learn what type of house a buyer is qualified to purchase. It is also important to monitor interest rates. This is significant because when interest rates go up, so do monthly payments. If a person was pre approved for a house with a monthly payment of $1,000 and interest rates jump a percent, they may need to adjust the price range they are looking in. Most lenders are willing to give this updated information with relatively short notice. It can save a lot of time looking for  a house when the field is narrowed to houses in the buyers price range.

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