How Hard is it to Get a Mortgage?
Mortgage credit availability is expanding, meaning it is easier to finance a home today than it was last year. However, the mortgage market is still much tighter than it was prior to the housing boom and bust experienced between 2003 – 2006.
The Housing Financing Policy Center at the Urban Institute reveals 2 reasons for the current high credit standards:
- Additional restrictions lenders put on borrowing because of concerns that they will be forced to repurchase failed loans from the government-sponsored enterprises or Federal Housing Administration (FHA).
- The concern about potential litigation for sub-standard loans.
What’s the result of these higher qualifying lending standards? 6.3 Million Less Mortgages!
The Policy Center report went on to say:
“It was so hard to get a mortgage in 2015 that lenders failed to make about 1.1 million mortgages that they would have made if reasonable lending standards had been in place. From 2009 to 2014, lenders failed to make about 5.2 million mortgages thanks to overly tight credit. In total, lenders would have issued 6.3 million additional mortgages between 2009 and 2015 if lending standards had been more reasonable.”
The cost to the economy of lenders writing fewer loans…
Laurie Goodman and Alanna McCargo of the Policy Center put it best:
“…fewer households will become homeowners at exactly the point in the economic cycle when it is most advantageous to do so… [They] will continue to miss this wealth-building opportunity. The median family wealth for homeowners is $195,400, with their home the most valuable asset for most; the median family wealth for renters is $5,400… Fewer potential homebuyers means the housing market will continue to recover more slowly. At the same time, fewer buyers create a strain on other benefits to the economy which homebuying brings such as spending on home goods and an increase in construction jobs.”
Real Estate Bottom Line
The housing market collapse caused many mortgage banks and lenders to tighten their lending standards. This along with many home buyers disqualifying themselves before they even apply for a loan, (due to the fear of being turned down), has led to many potential buyers not reaping the benefits of home ownership. Let’s talk to see if you can qualify!