CreditCrunch Back-to-Basics Lending: Lenders Say No Mas to Mortgages with Zero-down Payment

CreditCrunch Back-to-Basics Lending: Lenders Say No Mas to Mortgages with Zero-down Payment

First-time buyers are in it for a rude awakening. They will be required to put down up to 3 % down on their mortgage deal. The percentage may be different if it has to do with a jumbo loan of more than $417,000. It is the time to go back to the basics of lending championed by Fannie Mae and Freddie Mac in the mid-1980s. Lenders are taking measures to eliminate zero down-payments these days. It is a clear sign of the credit crunch this country is going through. Lenders are not willing to take risks any longer. Most buyers or consumers will have to have a credit score of 700 to even consider negotiating. Remember that the score of 850 is considered optimal. If borrowers are in the 300 credit score, they do not even need to show up these days. Lenders will examine the borrowers' credit history which usually has some inaccuracies. Borrowers should be ready to fix, dispute and correcting any errors found in the reports issued by the credit bureaus. Only after doing all of that, will borrowers have a chance to see their scores boosted and secure better loans. For some time to come, jumbo loans or mortgages of more than $417,000 will be out of the question for many borrowers.

As long as the credit squeeze continues, lenders will continue to minimize their loss. Due to foreclosures and the depreciation in home values, many homeowners who used to pay their bills are finding themselves in a tight impasse. They figure it is easier to just walk out of their loans.

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