The housing market is a mess, and mortgages are harder to get; but there are also some rare and wonderful deals on the market. Those who can come up with mortgage funds can capitalize on the unusual opportunity while it lasts, and there are a variety of ways to help fund a purchase.

Just because mortgage lenders are tightening purse strings doesn't mean that homebuyers should throw in the towel. There are some great bargains out there. If mortgage approval seems to be the only obstacle, it may pay to examine various strategies for qualifying for traditional loans, or borrowing in more unconventional ways.

Credit where credit is due

The first avenue of approach is to take a hard look at your assets, income, and credit history. If your credit score is weak, spend some time getting it back into shape. Request a fresh copy of your credit report from the "big three" credit reporting agencies Experian, Equifax, and TransUnion. Review it for inaccuracies and outdated information, and challenge any errors. The agencies respond, because they base their livelihood on good data, not the erroneous kind. But it takes time, so start the process at least two to three months before applying for a mortgage.

Every time a lender checks your credit, it weakens your credit score. Don't shop all over town, and avoid opening new lines of credit just for the convenience of getting a 10 percent discount at a department store. Save your credit for the more important purpose of securing a mortgage. You can always apply for that plastic later, after the mortgage is approved.

Other funding options

If someone co-signs your mortgage application, it may be easier to get approved. Many first-time buyers, for example, will get supportive parents to help as co-signers.

Your local banker is not the only game in town, either, so consider using a reputable mortgage broker to shop around for a better or cheaper loan. They can also check out the details from a variety of lenders beforehand; this helps you avoid the adverse pulling of your credit report by multiple lenders.

Professional investors often use so-called "hard loans." These financial instruments offer special advantages. You'll likely pay at least a point of higher interest for a hard loan mortgage, but these private lenders are more flexible about working with people who have blemished credit. What's more, they can often fund the loans in half the time it takes for a traditional bank to complete the underwriting process.

Lighten the load if that's what it takes to liquidate assets, and turn them into cash for the down payment or closing costs. Selling such things as extra cars, stamp collections, or other collectibles accumulating dust in a safe sometimes frees up enough money to make the mortgage work. As with credit cards, you can always re-acquire those nonessential items after you secure your mortgage and buy the house.

Published on July 18, 2008