The recession is not something endemic. Its great arms leave a wake of financial ruin to the most unfortunate of people anywhere in the world. News of the recession’s effects is ubiquitous. Nowadays, it’s getting harder and harder to get approved for a mortgage application. The recession has made lenders quite chary about risks and, oftentimes, furnish stringent criteria for qualification. If you’re eyeing a home for sale in your area, peruse this information to know how recession can affect your mortgage.
Larger Down Payment
Nowadays, it’s hard to get a lender to approve a 10 percent down payment on a home for sale. It’s typical to see 80/20 mortgages around; some even require larger down payments. Offering a large down payment is the common practice of homebuyers today in order to reduce the total amount they need to finance for the property they want. Small loans are the most accessible type of home loans today.
Those looking for jumbo loans will find it tremendously difficult to find a lender who offers one. This type of loan goes beyond the national loan standard set yearly. And since these are high-risk loans, lenders often stay away from them.
Harder Approval Rate
This type of economic climate makes lenders particularly aversive to risks. They want to make sure that the borrower will commit to the loan and will not likely default on the payment. When applying for a mortgage for your home for sale, expect your lender to ask for some sort of safety to protect them from default. Most likely you will need to provide collateral during the loan application. The collateral can be anything from the deed to the home to liquid asset. Lenders may hold the collateral in their possession until the loan is completely paid off.
Yet in this kind of unpredictable and sluggish economy, the deed of the home may not be worth much to your lender. In this instance, your lender can go as far as asking to offer additional security, like businesses, cars and others that can guarantee the loan will be paid off.
Expect fewer loans during a recession. Even if the market and several homes for sale are affordable, you cannot easily buy one for yourself due to the number of loans available. The best thing to do is to be competitive. There are others vying for the loan you want, so you need to up your game. Be diligent in your application and make sure you don’t leave out any information
Mark Michael Ferrer
Homes for Sale