10 THINGS YOU NEED TO KNOW ABOUT BECOMING A HOMEOWNER....2009 AND BEYOND

1. Credit requirements for loans are still very tight. With unemployment rates still high, banks are tightening up on lending standards for all borrowers. Even those with great credit histories.

2. Expect for Down payments to be higher than normal. Loans backed by the Federal Housing Administration are at the low-end of the spectrum and come with minimum down payments of 3.5 percent. To get the best rate, you should have at least 20 percent for a down payment.

3. A Credit Score of 730 or higher. In order to get the best mortgage rate, a borrower should have a FICO score of at least 730. You should also be able to fully document your income and assets. To ensure that your credit score is as strong as possible, make sure to access your credit report in advance to see what you’re working with.

4. If you don’t meet good requirements to borrow on the FHA. The FHA is a federal agency that insures mortgage loans against default. Standards for FHA
loans are much lower than those for private lenders. The average credit score for FHA borrowers is about 690, and the minimum down payment is 3.5 percent.

5. With the recession as a factor, the FHA has increased. The FHA now guarantees nearly 3 of every 10 new home mortgages. This is a major increase opposed to 2006 when the agency only backed roughly 3 percent of new home loans.

6. Beware of Asset Purchase Program Changes. The Federal asset purchase program is scheduled to expire at the end of 2010, which could lead to higher rates. Keep in mind that the Fed has already extended this program once.

7. Stay Away from Jumbo Loans. Many borrowers won’t be able to obtain them. Most banks apply much stricter lending standards to them. Stay within your means.

8. Knowledge about Federal Fund Rates. While an increased federal funds rate could bring adjustable rate mortgages or higher home equity lines of credit, it has little direct influence on fixed mortgage rates.

9. Recovery in the Market could Equal Increased Mortgage Costs. Economic improvement could create more demand for credit, which will push rates higher. Economic improvement and other factors could raise rates on 30-year fixed mortgages as high as 5.75 percent as soon as summertime.

10. Fannie Mae and Freddie Mac Rebuilding is Crucial.The two mortgage finance giants buy home loans from banks and are a key source of liquidity for the market. Depending on how soon they rebuild, we could have some issues in the supply chains with mortgages.