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You may have noticed that the real estate market seems to be completely out of whack (technical term) at the moment, which means you need to be extra careful. In short, you need to know the secret to avoiding a financing disaster when buying a home.As you know, the mortgage industry globally has faced a major credit squeeze at the moment and has recently swirled down the proverbial drain over the last two years. The royal flush has ended, but the mortgage waters are still currently settling down. If you are not careful, you can run into major problems when buying a home. How so you ask? Ok, lets take a look. Congratulations, life is going great and you are moving on up. Yep, youve sold you home and have drawn $250,000 in equity out of it so you can buy a new home that is twice as expensive. You have $250,000 as a deposit to put down from the sale of your old home and you have a great salary, perfect credit and all you need is a loan for $400,000.As a perfect borrower, you should have no problems getting the loan right? Assuming as much, you go out and do some house hunting and find the perfect place. After finding a new abode, you negotiate a deal with the seller and everything looks great. Unfortunately you forgot a crucial step and a week or two before closing, things go to hell in a hand basket. Why you ask? Because youre application for financing has been rejected!This scenario is playing out all over the country these days. Why? There is a credit crunch. The common belief seems to be that it is only people with bad credit that cant get loans. This is a mistaken belief. The mortgage market is extremely tight because nobody is investing in mortgage loans. Theyve been burned so badly that most major investors cant risk even the best loans. When Bear Stearns basically went bankrupt and Washington Mutual had to raise billions in capital, it should have set off far more alarms then the events actually did. So, what can you do to avoid problems with your financing when buying? The answer is to get pre-approved in writing. If the bank is willing to put pen to paper, you can be confident the money will be there. Raynor James writes about FSBO issues for FSBO America.
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