How Are Secured Bank Loans Faring After Subprime?

Following the subprime credit meltdown, many banks and home mortgage lenders are drastically changing the way they make secured bank loans. Secured bank loans are simply loans that are made when some sort of collateral is offered to secure the loan. In the event that the borrower defaults on a loan, the lender takes possession of the collateral and disposes of it accordingly. Of course, with home mortgage loans the collateral is the home itself. If you don't make your monthly mortgage payments, the bank will foreclose on the property, and will probably sell the home at public auction.

How Home Mortgage Loans Have Changed
The fallout from the subprime credit crisis has caused many banks and home mortgage loan lenders to reevaluate how they do business. For example, banks and lenders are now asking for much more in proof and documentation when considering credit applications from would be homeowners. Most banks require verification of all items listed on the home loan application.

In addition, most banks and home mortgage lenders are requesting copies of borrowers 1040 income tax returns directly from the Internal Revenue Service on all loans. Previously, lenders performed this only when there was a problem with a loan or randomly, as a quality control measure. The lender needs your express written permission to be provided with copies of your income tax returns by the Internal Revenue Service, but if you don’t give it – they deny your loan application.

Banks are now tightening their belts with funds that are made to finance home purchases. In fact, lower credit scores that may have qualified you for a loan a few years ago are now basis for loan denial or requests for much higher down payment amounts. In fact, some lenders are moving away from making loans that do not involve traditional 20% down payments.

Impact of the Subprime Credit Crisis
The most apparent effect of the subprime credit crisis is the lack of available credit for homebuyers. Potential home buyers are now being required to show more dependability with regard to credit scores and verifiable income. Moreover, banks are simply being much more careful about who they loan money to.

Therefore, if you're shopping for a home mortgage loan, make sure to have all your financial affairs in order - before you submit an application. Make sure that you can verify all sources of income, and have verifiable copies of bank statements and income tax returns. Also, make sure to be as thorough and honest as possible when filling out home mortgage loan applications. Chances are the bank will want to verify everything associated with your application – so, proceed carefully. Lastly, be sure to review your credit report and have all erroneous information corrected because many lenders will no longer offer credit to borrower with scores lower than 640 or 660.