We’ve weathered a tough year in the mortgage market and if you’ve been waiting it for it to turn around, don’t expect much of a change in 2011. The market and mortgage collapse have changed the face of lending for some years to come. Planning on buying a new home in the new year? Here are five things you should be prepared for:

  1. It’s tough to get a mortgage. Lenders today face a couple of huge challenges – they just can’t get on the hook for more bad mortgage debt and they must operate under strict regulations on how much real estate they can have in their portfolios. How does this affect you? Your bank has no more ‘easy money’ for you. If you are borrowing outside of FHA backed guidelines, you may have a hard time getting that loan approved and closed.
  2. Good credit counts more than ever before.You can be turned down for a mortgage on the credit criteria alone. A good credit score will affect your ability to get a loan and the interest rate attached to it. If your credit is less than perfect, get busy now to repair it.
  3. No money down is no more. You are unlikely to find any lender that will offer 100% financing. Be prepared to hand over as much as 20% down, less (and more negotiable) on FHA loans. Your lender will also look at the status of your cash reserves, to make sure that you can handle your first payments
  4. Banks are cutting off their ARMS. Adjustable Rate Mortgages contributed to the housing bust and most lenders are wary – and you should be too. With interest rates so low, you are probably better off with a 30 year fixed, especially if you are planning to be in your new home for some time. In a volatile economy, an adjustable rate mortgage can blow up quickly if you haven’t prepared properly for it.
  5. Interest rates should stay low in 2011. While rates have crept up a bit recently, don’t expect a significant increase in mortgage rates this year. Experts see them hanging below 5%, so this could be the year to take action if you have been hesitant about buying a new home.

Overall, the mortgage business is still shaky. The good news is that you will still find great homes at low prices and that interest rates should remain favorable in 2011. The tricky part will be getting a lender to handle your loan.

 

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