As you know, the mortgage industry swirled the proverbial drain over the last two years. The flush has ended, but the mortgage waters are still settling down. If you aren’t careful, you can run into major problems when buying a home. How so? Let’s take a look.
You’re moving on up. Yep, you’ve sold you home and pulled $250,000 in equity out of it. You are buying a new home that is twice as expensive. You have $250,000 to put down, perfect credit, a nice salary and need a loan for $400,000.
As a perfect borrower, you should have no problems getting the loan right? Assuming as much, you go out and do some house hunting. After finding a new abode, you negotiate a deal with the seller and everything looks good. A week before closing, things go to hell in a hand basket. Why? You’re application for financing has been rejected!
This scenario is playing out all over the country these days. Why? There is a credit crunch. The common belief seems to be that it is only people with bad credit that can’t get loans. This is a mistaken belief. The mortgage market is extremely tight because nobody is investing in mortgage loans. They’ve been burned so badly that most major investors can’t risk even the best loans. When Bear Stearns basically went bankrupt and Washington Mutual had to raise billions in capital, it should have set off far more alarms then the events did.
So, what can you do to avoid problems with your financing when buying? The answer is to get pre-approved in writing. If the bank is willing to put pen to paper, you can be confident the money will be there.
Raynor James writes about FSBO issues for FSBOAmerica.org where you can list your land for sale by owner for free for 1 month.