Petersburg VA Real Estate: Credit Score
Lenders are telling us that they want to make loans, but in this difficult economy, those with the best credit will be approved. While many Americans are struggling to make payments and hang on to their good credit scores, mortgage companies and other institutions are tightening their standards and credit qualifications more than ever before.
Those rock bottom interest rates? They are reserved for top tier credit risks – borrowers who have scores of 720 and above. Your banker is also looking for thorough documentation of your income and assets. Keep in mind that from mortgages to car loans, your credit history and score matter more than they did
If you’re buying Petersburg VA real estate or refinancing the mortgage on your primary home, you’ll need a minimum down payment of 5% to 10% for a conforming loan or 10% to 15% for a conforming jumbo loan (125% of a metro area’s median home price, up to $729,750).
Fannie Mae and Freddie Mac will take a credit score of 620 if you have at least 25% equity in the property or a score of 660 with equity of less than 25%. Oh and that debt to income? Make sure it’s at 36% or less.
In addition to stellar credit history lenders look for:
- Proof of income – You’ll need to show pay stubs for the past 30 days and W-2 forms for the past two years, along with retirement-account and investment statements.
- Self-employment – Be prepared to give up two years of tax returns and keep your fingers crossed. It’s become harder than ever for declared income borrowers to get mortgages and other lines of credit.
- Rental income – You can use only 75% of rental income to qualify for a mortgage, along with 30% equity in your former home.
Even if you are preapproved, you will be subject to a second or final approval – lenders will pull a second credit report before closing. If you have taken on any new debt, your deal may go right out the window. Home equity loans are tougher to get now as well. In most areas you’ll be able to borrow no more than 80% of the appraised value – and that’s with your perfect credit score.
The bottom line – take good care of your credit. It can be very challenging in this recession but your credit history and credit score are more important than ever. Bad lending practices have resulted in tight standards that will give credit only to the top tier borrowers who have enough cash and income that they may not even need to borrow money in the first place.
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