One of the main challenges homebuyers face during the purchasing process is gaining approval on a home loan. However, those who are currently in the process of working with an Illinois real estate lawyer to successfully purchase a home may find that acquiring a mortgage is an easier process than they expected thanks to two major changes recently made to government-based loan products.
The two major policy changes
In December of 2014, Fannie Mae and Freddie Mac announced plans that they would begin accepting mortgage applications from buyers who could only put down a three percent down payment. At the end of January this year, the Federal Housing Administration also reduced the mortgage insurance premium amounts that those who have an FHA-backed loan are required to pay.
Although Fannie Mae and Freddie Mac’s new program has not yet taken effect, the FHA’s new initiative has already had an impact, particularly among refinancers. During the last week of January, the number of homebuyers submitting FHA home loan applications comprised 13.1 percent of all mortgage applications. Additionally, the number of applications submitted for the purpose of refinancing an existing FHA-backed loan rose by 76.5 percent during this same time period.
Gaining approval for a mortgage
Although these recent mortgage policy changes may benefit homebuyers working with an Illinois real estate lawyer who need to obtain a mortgage, there are certain steps those in the midst of the purchasing process should take to ensure the success of their application. These include the following:
- In the months leading up to their purchase, homebuyers should avoid making significant changes to their credit profile that could harm their overall credit rating.
- Homebuyers should gather and organize crucial financial information that could impact the outcome of their mortgage application. This may include collecting tax returns for the two previous years, checking and investment account statements and any W-2s from their employer.
- A few months before purchasing a home, those looking into buying property should avoid moving their money around. For example, buyers should refrain from moving funds in a savings account into a certificate of deposit.
- Those who are self-employed should plan to take fewer deductions on their taxes in the few years before they plan on buying a home. This will ultimately boost their overall documented income.
Although these strategies may help homebuyers qualify for a mortgage, the application process can be frustrating and difficult to navigate through successfully. Those who desire to purchase a home in the near future may benefit from working with an Illinois real estate lawyer who can help them better understand the mortgage application and approval process.