Will it be tough to snag a mortgage loan in 2011?

As the US mortgage market is going through difficult times, getting a mortgage loan may become tougher in 2011, according to most financial experts. The terms and conditions and the requirements while getting a loan have all become too stringent so as to limit the number of lenders who are taking out mortgage loans in the US. As the unemployment rate is at its all-time high and there are very less job opportunities within the nation, most people are failing to make ends meet. The number of mortgage defaults and the number of foreclosed houses reflect the state of the present mortgage market.Credit score, debt-to-income ratio and the down payment requirements have all become stringent enough. Have a look at the reasons for such tough conditions while taking out a mortgage loan in 2011.

1. Surging mortgage rates: Although the mortgage rates on the US are historically low, most mortgage experts are of the opinion that the rate will increase throughout 2011. While some say that the 30 year term mortgage loan could increase up to 5.5%, some others say that it is not so. Higher interest rates may affect the loan eligibility by increasing the monthly installments and the borrower’s ability to qualify for home loans.
2. Low conforming limits: The conforming loan limit in the posh areas like New York, San Francisco, Washington D.C and Los Angeles are scheduled to expire on September 30, 2011 and has dropped from $730,740 to $635,450. Since Fannie Mae, Freddie Mac and the FHA will not guarantee mortgages over the conforming limit and mortgages over the limit will be subject to high interest rates and tight restrictions.
3. New price adjustments: Fannie Mae increased the costs for borrowers with low credit score and less home equity and changes it to what it can be called as loan level price adjustment. While the borrowers with good credit and a good amount of equity in their home will not remain affected, the lenders will pass the mortgages to borrowers who want their mortgage rates to increase anywhere around 0.12% to 3%.
4. Higher credit score: As an increasingly large number of consumers are facing credit problems due to unemployment and low home values, credit score requirements remain high. While a 580 credit score was accepted a few years back, nowadays Fannie Mae and Freddie Mac doesn’t settle for anything that is less than 620 to lend a loan with affordable interest rates.
5. Low debt-to-income ratio: The DTI ratios are required to be relatively high in 2011. While lenders used to settle with 55%, now Fannie Mae requires typically 45% in order to approve a loan. Try paying off your debts in full so as to grab the best mortgage loan in the market.

Thus, if you want to purchase a house in 2011, make yourself prepared to get the most competitive loan in the market. Be aware of the points mentioned above so that you can easily repay the loan that you’re taking out.