Financial Literacy - Credit savvy
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High credit scores get top loans

Mortgage applications in Illinois are up slightly, according to one local mortgage expert.

"I don't have an exact tally, but I do know the numbers are up. Sales in those areas are up because they didn't have the rapid run-up on prices that the Chicago metro area did," says Jorge Gomez, president of the Illinois Association of Mortgage Brokers.

As in the West, Gomez says buyers with adequate cash reserves and credit scores north of 700 have no trouble getting mortgages, although the trick again is to come up with a 20 percent down payment.

A favorite summer haunt of Mark Twain, Elmira, N.Y., also posted solid price gains recently. The median single-family home price was $105,000 in third quarter -- a gain of 12.5 percent from a year ago, according to the NAR.

In the Elmira area, buyers are getting loans mostly through local banks that have closer ties to the local real estate community, says David Oldfield, a senior loan officer at Twin Tier Mortgage.

Oldfield says the smaller community banks, such as credit unions, tend to be more flexible in their underwriting standards and have a greater stake in the local community than the larger corporate banks that originate loans based on more rigid guidelines.

"If you want a home loan in the Elmira area, you'll need at least a 650 credit score, and the loan-to-value will be maxed out around 80 or 90 percent," he says.

Loan-to-value ratio, or LTV, is the percentage of the home's price that is paid for by a mortgage. Generally, the higher the LTV, the less money the buyer has to put down on the property.

If you can't qualify for a conventional mortgage, a government-insured loan through the Federal Housing Administration may be the way to go, because it technically does not require a minimum credit score, although some lenders impose their own credit floors.

Cash-strapped and credit-challenged buyers appear to be taking advantage of the FHA program in increasing numbers.

The government-insured share of mortgage applications, which consists mainly of FHA loans, increased from 9.4 percent in January 2008 to 32.9 percent in November 2008 -- the highest level observed since February 1991, according to the Mortgage Bankers Association.

"For people who are not in those higher credit tiers, FHA really is the only game in town," Gomez says.

Auto loans

Consumers may find it a little easier to get an auto loan than a mortgage.

The reason: Dealers are under tremendous pressure to move cars off the lot because of anemic sales and tepid consumer interest.

The Big Three automakers alone sold 1.5 million fewer vehicles during the first 10 months of 2008 versus the same period in 2007, according to Manheim Consulting.

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But misery in the auto industry translates into good news for consumers, as most auto manufacturers are offering customer incentives such as low-interest financing or cash-back rebates to qualified buyers.

Buyers with credit scores well north of 700 are likely to get the best interest rates on auto loans, says Melinda Zabritski, director of automotive credit at Experian Automotive.

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