Tighter Standards:  Back to Normal

Lenders have tightened up their lending standards as a result of the financial melt-down and housing bust.  This is as it should be since much of our current crisis is a result of loose lending standards and teaser rates as low as one percent which lured buyers into homes they could not afford.  Current lending standards have simply corrected to what they have been in the past and are more like what they should be for banks to make good loans.

Working Out Credit Issues

If your credit score is less than what you need, or your time on the job is insufficient, then you may need to wait to buy, but that doesn’t mean that you have to lose out on the benefits of this buyer’s market!  I suggest you consider buying using a lease with option.  With an option, you can negotiate the purchase price and the terms of the purchase now and then rent the home for a period of time before you actually close on the purchase.  It is quite common in this market to negotiate one or two year purchase options.  If you decide to take this route, I recommend that you sit down with a good lender now, before you enter into an agreement, and discuss what steps you will need to take to qualify for the loan in the future.  Your lender will help you to map out a plan to improve your credit score or build a longer track record of time on the job, so you can close on the purchase with your new loan a soon as you qualify.  This still gives you the security of knowing that the house won’t be sold out from under you and that you have locked in the price and terms.  Often you can negotiate a portion of the rent to be applied to the down payment .This provides the added benefit of using money that would be spent on rent anyway.

Seller Financing

Another method of buying when the conventional lenders turn you away is to look for seller financing.  Often times a seller will finance you with “no questions asked”.  Other times sellers will take a loan application and run your credit just like a lender would, but in this case you are negotiating with a person who may be very motivated to sell you their house.  Many sellers want to continue to get payments and a decent interest rate without the management hassles, so they are happy to carry the financing.  In these situations everything is negotiable and that is to your advantage!

Is a "Fixer-Upper" right for you?