I apologize that this posting is late. I thought it had been uploaded!

There are difference aspects of the financial picture that are common in what makes a good mortgage loan. All of these elements have a degree of risk to the lender. Mortgage companies judge these risks and assign a credit grade to them. The higher the risk to the lender results in a higher rate to the borrower.

We will review the lenders’ point of view on borrower assets:

What assets does the borrower have? Where did they come from?

Just about every single lender will want to see that they borrower has “reserves”. Reserves are additional funds, which can be verified prior to closing.

The lenders want to see that the borrower is not spending his last dime to buy or refinance the property. With the tightening in lending practices today, reserves of up to six house payments are likely to be required for loan approval. Of course, there are many loans where this will not be required. I make the point about reserves to point out the trend in lending practices today.

A borrower who has a long habit of putting money into a savings or investment account is a huge asset to any loan approval. The foresight and discipline shows maturity and care in the handling of finances.

Another aspect to lower the risk for the lender would be a borrower who brings the proceeds from a sale of their current home. The experience that a person has in making a house payment over a period of years is an excellent benefit to a loan approval because of the experience the borrower has with owning real estate.

The amount of the investment that a borrower makes in buying their new home will also be considered when a loan package is presented to the underwriter. A 20% down payment on a house removes many of the requirements that are involved with a home loan. A purchase loan with 20% down will make a lender more comfortable with higher front end ratios.

If the borrowers also have a large 401k, it is even better. Showing the ability to save money and to handle investments is a sign of responsible handling of money and looking toward the future.

The lender will want to see that you have not used every single dime you have to get into the house. Having additional funds for an emergency is essential for a solid loan approval at the best rates.

Of course, twenty per cent down on a home is not required in order to purchase. There is still 100% financing on home loans; the biggest change is that Stated Income loans are not as readily available.

First time homebuyers can purchase with little or no down payments.tTre are many community programs that will actually give new buyers a down payment or closing costs.

FHA allows any new buyer with 3% down. For California, the loan limit currently in place with FHA takes higher priced properties out of the picture,but the govenor has asked that California be named as a high cost area. This would increase the loan limits for FHA loans significantly.

There are Conventional loans with three to five per cent down. Your choice of loan programs improves dramatically based on your credit scores.

Besides saving for a home purchase, it is also essential to review your credit report and credit scores to be sure that it is presented at its' best.