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Getting a mortgage in the credit crunch

Date Added: November 06, 2008 06:08:41 AM
Author: Chris Clare
Category: Blogs: Money
The onset of the credit crunch is making it ever more difficult to get a mortgage and you may have found that the credit score that you achieved last year does not lead to you instantly obtaining the best market rates this year. To understand the situation you first have to be aware of what exactly is out there that is affecting your ability to get particular mortgage products with particular lenders. This issue is broken down into two parts. The first part is the credit crunch itself and the second part is how lenders score borrowers for mortgages. The credit crunch is not just affecting UK markets. Although it is affecting the UK in particular, it has ramefications the world over.In a nutshell, the money lenders are having difficulty in acquiring the money which they subsequently lend on to you, the borrower. Lenders get their money reserves from the money markets in the US. However, poor returns in the US money markets and bad investments have meant that the lenders are reluctant to lend out any more as the risks are too great. Mortgage lenders can still get money but currently they can only get it if they commit to vetting borrowers a lot more strictly than they have been in the past. This has resulted in the second reason why you may find it harder to get a loan and that is credit scoring. Using a computerised screening system, lenders will assess various aspects of a potential borrower's profile to see how reliable a borrower they will be. If you score high, you will be seen to be a sound investment and you will probably get the mortgage you want. If your score is low, however, you may be seen as a risky investment and will either not get the mortgage or will be granted it at a higher rate. This is also known as sub prime lending. Your credit score is established by a lot of factors and most of these factors are kept very secret by the lenders as they do not want you to manipulate it. But there are easy ways in which you can ensure that your credit score is as high as it can be. You need to ensure that your address history for the last 3 years at least is as stable as possible. Credit scores are affected by multiple addresses, so if you moved 6 times in the last three years this will reduce the overall score. You also must ensure that you are on the electoral roll as this is one sure way that the lenders can tell if you actually reside in the address that you say you do and are not given to flitting around where they would find it harder to stay in contact with you. Having a landline phone is also a must, it has to be said this does not have a huge effect but it is better than just having a mobile phone. Having a stable employment history is also a must again lenders do not want to see people changing jobs every couple of months this spells trouble and they feel it could leave you without a job in the future and them without mortgage payments. Finally the big one, make sure you do not miss payments on loans and credit cards. It is important to have credit as having no credit gives the credit scoring system nothing to work with so gives you no benefits at all. Having a nice amount of healthy credit ie paid every month is great for the system it eats up good credit and suggest to the lender that you are a potentially good borrower. So as you can see if you follow some simple steps can take a lot of the trial and error out of obtaining the best deal for you as the credit crunch takes hold. And always bear in mind that mortgage brokers deal with these scenarios on a daily basis and so who better to go to for the best advice for your financial needs. Mortgage Route offers information help and advice on mortgages from qualified mortgage brokers along with no obligation mortgage calculators and sourcing tools.
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