You’ve heard that many people are having trouble getting approved for a mortgage. Loan applications are denied left and right, and even those with good credit can’t seem to get their hands on any money.
Fortunately, however, there are ways to improve your chances in the loan officer’s office, and you might be closer than you think to buying the home of your dreams.
In fact, mortgage interest rates often plummet during a recession and the months leading up to it.
If you can get your finances in order and present them with sufficient clarity to impress a housing lender, you might end up with a better rate than you would get during better economic times.
Of course, this all depends on your ability to convince the lender that you qualify.
Consider Banking Relationships
It is easier to obtain a mortgage in a recession if you go through a banking institution you have used for years.
Consider first the bank at which your checking, savings, money market or certificate of deposit accounts are held. These institutions are familiar with your financial habits and might be more likely to extend a loan.
It will also be easier to assemble the paperwork because much of the information is already in their possession.
If you can’t go with a current banking relationship, you might want to open a checking or savings account with a new bank, then apply for a mortgage after a few months.
During a recession, lenders are more comfortable doing business with people who have already been in their books for a while, and this will improve your chances considerably.
Check with Your Employer
If you are employed by a large corporation, chances are your employer has a relationship with a credit union.
Even if you haven’t used them in the past, now might be a good time to start.
According to Liz Pulliam Weston of MSN, credit unions generally have lower interest rates than banks, which means that your approval will be met with less money out of your pocket.
Again, this also creates a relationship if your employer already uses the credit union. During a recession, relationships – including third-party relationships – can make all the difference in whether or not you are approved for a mortgage loan.
Save, Save, Save
Regardless of the economic climate, it is easier to obtain a mortgage when you can afford a larger down payment. This is multiply true during a recession.
If possible, hold off on your mortgage loan application until you have amassed a significant down payment to put toward the principle. Where you might have otherwise put only 20 percent down, shoot for 40 percent or even 50 percent instead.
If you don’t have that type of liquidity available, you might consider borrowing from a friend or family to get a mortgage during a recession.
This won’t affect your credit rating and won’t decrease the amount of credit available to you. It is easier to set up repayment schedules with relatives, and is a huge bonus if you have someone in your life who would be willing to help you out.
Monitor Your Credit
Before you apply for a mortgage loan in a recession, do your best to get your credit in tip-top shape.
This means paying off your credit cards so you aren’t using up all available credit, making sure all bills are paid on time, avoiding applications for new credit and satisfying any delinquencies.
The healthier your credit report, the more attractive you become to lenders.
Contrary to what the media might want you to believe, it is not impossible to obtain a mortgage during a recession. Simply approach this obstacle with as much organization and preparation as possible, and use all avenues of assistance open to you.