Mortgage financing is an important debt instrument backed by collateral that allows the investors to buy real estate without paying the entire purchase price at once. Financial markets have tightened up and impacted the lending industry. Changing from a liquid market with plenty of investors and lenders the market is now soft and buyers find it harder to get finance. Now investors even with good credit history are facing issues in getting mortgage funding.
Some of the issues are discussed below:
• Liquidity crises:
The lending activity of financial institutions has suffered badly due to the financial crunch of earlier years. The mortgage market has become unattractive with fewer buyers and restricted lending. Now lenders do not have enough resources to indulge in this activity and buyers are not equipped with essentials to get mortgage approval.
• Financial condition of Banks:
Another reason for the problems in getting mortgage funding is the liquidity position of banks and other financial institutions due to difficult economic situation or any other reason. The availability of funds seems to fluctuate and there is still uncertaintity in the market place.
The evaluation criteria of approving mortgage financing are relatively much stricter. Now the lenders are only lending to those investors who have enough deposit and income to ensure that they are capable to pay back the loan. If there is any ambiguity like bad credit history or bankruptcy then the lenders hesitate to approve the mortgage funding.
• Property Disputes:
If the collateral property is disputed in terms of ownership or has any legal limitation then this can prevent the lender to allow the mortgage financing. Not only is it the lenders who are making the decisions but also the mortgage insurers who have the final say as to whether they will insure a mortgage or not when the deposits are minimal.
Recommendations to deal with mortgage funding challenges:
In spite of above mentioned issues, the mortgage market is still going on. There are some tips and precautions adopting which the investors can easily succeed in getting mortgage funding.
• Complete your paperwork before applying for the mortgage financing. Gather your bank statements that show your good credit history and provide any other proof of your capability of paying back the loan, along with the last two years tax statements.
• Before applying for the mortgage, you should have enough money in deposit as most of the lenders these days are not lending the full cost of the property.
• Take financial advice about the method of repayment. There are many methods being practiced in the mortgage market, choose the one that best suits your needs. Fuly discuss all repayment options.
• Use the web to search for eligible lenders offering the best deals. All the information about price quotes offered by different lending companies is available on the web which can be compared to enable one to make an informed decision.
Summing up the topic we can conclude that the mortgage market is still hopeful. The restrictions and limitations to get mortgage funding are good for both lenders and buyers. The financial crunch has purified the market by pulling out the weak lenders and investors, making the market safe to invest.