Home Mortgage Loans: They're Increasingly Difficult to Obtain
In today's market some buyers are finding it is increasingly difficult
to obtain
home mortgage loans. The problem does not necessarily
relate to credit problems or the inability to provide a down payment,
although prospective homebuyers without good credit could find that it
is increasingly difficult to obtain a mortgage. In the past when a home
buyer without good credit wanted to purchase a home, they could do so
with the expectation that they would need to pay a higher interest rate.
Today, that is no longer necessarily the case. Prospective home buyers
with credit scores lower than 700 discover they have trouble getting
financing.
According to a report recently released by Gallup, one in five people
know someone who has tried to get a home mortgage loan but has been
turned down.
The issue at the heart of the current home mortgage crisis is tied to
the fact that there is simply less money currently available for home
mortgages. In particular, it is becoming increasingly difficult for
borrowers who have small down payments, low credit scores and very
little or no equity in the current homes to obtain a home mortgage.
Additionally, many lenders are also backing off on their willingness to
make loans that are not backed by Freddie Mac or Fannie Mae; two
government entities which purchase loans. Since these two entities
cannot purchase jumbo mortgages it is also becoming more difficult for
borrowers to obtain nonconforming loans, also known as jumbo loans.
These are mortgages that are over $417,000. While in some areas this is
not much of a problem in other areas it is becoming a crisis,
particularly in areas where average home prices tend to be quite high.
In these areas a larger number of buyers simply must have jumbo loans in
order to purchase a house because the home prices in their local area
are quite high. In Florida, California and Florida this has become a
serious issue.
Many borrowers are finding that even if they are considered to be an
excellent loan candidate if their mortgage amount is above the limit set
by Freddie Mac and Fannie Mae there could very well be a significant
increase in the interest rate they are charged. Whereas in the past if
you were not a prime borrower you could usually depend on paying a
higher interest rate in order to get a loan, today if you are not a
prime borrower, you may find that it is difficult to even get a loan.
It is not uncommon at all for jumbo loans to now carry interest rates
ranging up to 8% if you can get one at all. This is 1.5% higher than
rates offered just a short time ago.
Home buyers who are not able to make 20%
home down payment are also
feeling the crunch of the closing housing market. Once again, buyers who
have good jobs and steady credit are finding that if they do not have
that magic number for a down payment the ability to obtain a mortgage is
becoming difficult.
Obtaining a
second mortgage is also becoming more difficult.
It is not just small banks that are feeling the pressure either. Large
banks are also experiencing problems related to the housing crunch.
Profit margins have become quite small and as a result many banks have
simply stopped offering a number of the loan programs they once made
available. This has particularly proved to be the case with the riskier
loan programs.
Considering the rapid rise of
foreclosures across the nation many people
feel the tighter restrictions are necessary in order to control a
lending market that previously made loans available to borrowers who had
poor credit, few assets or were unable to provide proof of their income.
As a result, many people who would have been able to qualify for a loan
a short time ago, even a few weeks ago in some cases, are now finding
they are no longer able to obtain a mortgage. In some cases, buyers may
need to settle for less expensive homes but may still be able to obtain
a loan. Some buyers may also find that while they can obtain a home
mortgage it will be at the sacrifice of paying higher interest rates. In
other cases, buyers may need to simply wait to buy.
In short, it is not true that mortgage money is no longer available, it just have become more difficult to
attain. Mortgage qualifications are being more carefully examined and more documentation is required.
You will have a better chance of getting a home mortgage if you have a good steady job,
can prove your income, you can make a down payment of at least 20% and
your credit is stellar.
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