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Q&A: What market means for Florida home loans

With all the fears about job losses and slow economic growth, why didn't the Federal Reserve lower interest rates Tuesday?

While it's true that U.S. consumer prices fell last month for the first time in nearly two years, thanks to plunging oil prices, the Fed remains jittery about inflation and a weak dollar. Low interest rates have contributed to an anemic dollar and higher inflation over the past few years. As Fed chairman Ben Bernanke and his colleagues said Tuesday, "Inflation outlook remains highly uncertain." The Fed stressed that current rates, over time, should promote "moderate growth" if not the screeching appreciation that marked the last housing boom.

Does the Fed's relative stinginess mean Floridians can't get a good home loan?

By no means. As of Tuesday, you could still finance a house for less than 6 percent, low by historical standards. The problem isn't interest rates, but lenders that have tightened standards after getting spooked by billions of dollars in real estate losses. Few banks failed to notice the collapse of the nation's biggest mortgage lender, Countrywide, and its subsequent rescue by Bank of America.

So what does it take to get a home loan in Florida these days?

The no-documentation "liar loans" are relics of the housing boom that ended in 2006. Few lenders will take you seriously without a credit score of at least 680 and a similarly buff employment history. If you meet the loftier standards, government-backed loans can be had by putting as little as 3 percent down. Investment homes remain problematic since the area's been declared a "declining market" in which mortgage insurance is scarce. That means many investors will have to plop 20 percent down towards a home purchase, a tough task if you have to find $40,000 to buy a $200,000 home.

Q&A: What market means for Florida home loans 09/17/08 [Last modified: Monday, September 22, 2008 9:54am]
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