Mortgage Loans: Possible to Get Even in a Credit Crunch

The credit crunch has decreased applications for mortgage loans and made lenders skittish about approving new loans. Many homeowners and would be homeowners think there is no point to applying for a new mortgage loan or trying to refinance an existing mortgage. However, they may be missing out on a great opportunity. Now may be an excellent time to refinance or apply for a new mortgage.
Why is that? The Fed has drastically cut interest rates to stimulate economic growth, leading to substantially lower mortgage loans interest rates. That can mean a windfall for you in the form of lower monthly payments and a lower total cost for mortgage loans. If interest rates have dropped at least two percentage points between when you signed your mortgage and today, then now is the time to refinance and lock in a lower interest rate.
But arent banks leery of giving out new mortgage loans? Yes and no. The key is the borrowers credit rating. Banks are leery of offering new loans to anyone with a bad credit rating (and guidelines for what constitutes a bad rating are more stringent now), but they are happy, even eager, to offer loans to people with good credit. If your credit is good, then by all means, apply right away.
If your credit rating is slightly below the zone considered good, then there are a few simple steps you can take to raise it over the next six months. Pay all your bills on time scrupulously, putting them on automatic withdrawal if you can. The ratio of credit you have used to total credit you have available is important, so pay off as much as possible of your current loans and credit card balances. Ignore old advice to close down unused credit card accounts; leaving the accounts open increases the amount of credit available to you, improving your ratio of available credit to used credit. Be especially wary of closing very old accounts, since doing so could shorten your credit history, which you want to be as long as possible. If you take these steps, maintain your payments successfully for several months, and avoid taking on new credit card debt, in months your score should be markedly better.
As you can see, a crisis in the credit markets can be the perfect time to refinance or to apply for new mortgage loans. Be the attractive would be mortgage holder the banks want to see, and you can get a markedly lower interest rate on mortgage loans. Even a tight economy can turn to your advantage.