From the latimes.com:

Could gloomy popular assumptions about how tough it is to get approved for a mortgage be scaring away large numbers of qualified people?

You bet. Lenders and economists will tell you flat out: The lack of accurate information about the availability of loan programs designed to address special needs is discouraging far too many consumers from even considering an application, much less shopping around.

For example, what’s needed for an acceptable down payment? Is it 20%, 10%, less?

Yes, it’s less – and potentially a lot less if you qualify for the right program. The widespread erroneous assumption that banks require a minimum 20% for conventional loans may have arisen from heavy media coverage of a controversial proposal by federal agencies calling for borrowers to put down that much if they want to get the best interest rates and lowest fees.

If you have little or no cash to put down, there are multiple options: The Federal Housing Administration requires just 3.5% down on its insured mortgages. Other programs let you go to zero — even finance more than the price on the house when fees are rolled into the mortgage — provided you fit into an eligibility niche. If you qualify as a veteran or active member of the military, you can get a zero-down Veterans Affairs-guaranteed mortgage. Plus the VA allows your seller to pay your loan fees and closing costs provided that they don’t exceed 6% of the house price.

What about credit? Haven’t lenders been pushing up minimum FICO scores into the mid-700s and rejecting applications with lower scores outright? Not everywhere. Though most lenders doing FHA loans require 620 to 640 scores to get you in the door, a few of the biggest FHA originators, such as Quicken Loans, will accept scores down to 580. Bob Walters, Quicken’s chief economist, says underwriters scrutinize low FICO applications extra carefully but are seeing good to excellent performance from them: Not one has gone seriously delinquent this year.

And how about debt-to-income ratios? Aren’t they tighter than ever? Not really. Lenders say that when loan applications go through the “automated underwriting” systems used by Fannie, Freddie and FHA, borrowers with high total monthly debt levels of 45% to 55% of household income — well beyond the posted limits — frequently get approved if they have positive compensating information elsewhere in the application.

Bottom line: Don’t assume you can’t qualify for a mortgage in 2012. Talk to lenders and seek out loan products that offer flexibility where you need it. You just might be surprised.

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