Rick Beals

Getting a mortgage does not have to be difficult

You've seen the read the news and heard about the government's $700 billion rescue plan to deal with it. But what does it mean to those looking to get a mortgage and take advantage of lower home prices? Can someone still get a mortgage in today's volatile market? The answer is yes. While the credit markets have certainly tightened compared to two years ago, nearly $2 trillion of residential mortgages will have been funded in the US by the end of this year, according to the Mortgage Bankers Association. This means there is plenty of money available to potential borrowers who know how to properly position themselves for success.

Just a couple of years ago, the mortgage process were incredibly simple, and it seemed mortgage funding was available to everyone. All you had to do was pick up the phone, put in an application, and wait until closing. That was it. While a lot have changed, getting a mortgage today can still be a simple process, if you plan ahead. This means understanding documentation requirements, your credit history, minimum down payment requirements, and how to structure your mortgage. It also means working with an experienced mortgage professional who knows what lenders are looking for.

This means being prepared to supply income and asset documentation to support what is on your application. This could include your most recent pay stubs and bank statements, W-2s for the previous two years, and tax returns if you are self-employed or have non-salaried income.

If you want the best interest rates, you will need an excellent credit score of 720 or higher. You can, however, even with FICO scores in the low 600s, get a lower interest rate on a home loan guaranteed by the Federal Housing Administration (FHA), but you'll need a minimum investment of approximately 3.5%. This is a great option for you if you do not have the 10% or even 20% you might otherwise need to qualify for a low-interest fixed-rate mortgage.

To qualify for 100% financing today, you will have to qualify for either VA or USDA loans from the government. The Veteran's Administration (VA) and the US Department of Agriculture (USDA) have special programs that allow 100% financing for those who qualify. What is particularly attractive about both of these loans is that monthly mortgage insurance is not required and interest rates are very competitive.

For first-time home buyers (that's anyone who hasn't owned a home in the last 3 years), the government has also created a special tax credit of up to $7,500 for those who qualify. While you can't use the money as a down payment, this temporary credit can help lower your overall costs. Be sure to ask your lender about this special tax credit.

In the end, no matter which mortgage you choose, the best path for anyone buying a home today is to get yourself pre-approved – not pre-qualified. With a pre-approval in hand, you won't have to worry about the credit crisis. You will know exactly what you qualify for, and by getting pre-approved, your real estate agent will typically have the ability to negotiate either better terms or a lower price for you. That puts you in the driver seat to take advantage of some great real estate opportunities in a buyers' market.