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Smaller home loans may be more accessible

January 20, 2010 - Prospective homeowners may increase their chances of obtaining a home loan if they apply for a mortgage plan that is lower than what they can afford.

The economic downturn has made many lending institutions wary of prospective borrowers, which has made them less likely to approve applications for large mortgages, CNN reports.

Even applicants who have high incomes, several assets and good credit histories are being denied home loans due to the fact that many wealthy borrowers are having trouble making their payments on time.

Approximately 12 percent of mortgages over $1 million were late last fall, according to the media outlet.

As a result, many lenders are denying applications for similar plans or increasing their required down payments. Some institutions are expected to require homebuyers to pay up to 50 percent of home's value upfront.

Individuals who purchase homes that are at the lower end of their price range may be able to decrease their mortgage payments, make extensive home improvements or renovations to a smaller house or sell their home at a higher price than they paid when the real estate market rebounds.

The current rate for a 30-year fixed mortgage is 5 percent, according to Wells Fargo.

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