Credit scores seen as key for obtaining a home loan

01.13.09
By Nicholas Storie

In the new housing market, it is not enough for your credit score to be pretty good - it has to be nearly flawless.

According to a report in Reuters, some potential homebuyers who are trying to take advantage of record-low mortgage rates have been getting a rude awakening when they attempt to obtain a home loan.

Compared to a couple of years ago, lenders are currently more particular and risk-adverse, with many requiring additional documentation and a larger down payment than in the past.

Even people with good credit can expect the mortgage approval process to take longer, as banks try to determine whether they should be offered the best rates.

"The market has weeded out people with bad credit," New Jersey realtor Ellen Klein told the news provider. "They just want to make sure you're going to be able to pay the mortgage. Credit score is key these days."

Since mortgage rates began to fall, anecdotal evidence has indicated that those taking advantage of the deals have primarily been homeowners refinancing their existing home loan, rather than first-time buyers.

However, many people may still find it difficult to refinance, because they owe more on their home than it is currently worth.

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Homebuyers need high credit scores to get the best rates