Is It Too Difficult To Get A Mortgage?
We Keep Our Hands Wet For You
The mortgage market is 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 just released data revealing two reasons for the current exceptionally high credit standards:
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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).
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The concern about potential litigation for imperfect loans.
The result?
6.3 Million Fewer 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.”
In an interview with DSNews, Laurie Goodman and Alanna McCargo of the Policy Center further explained:
“Our Housing Credit Availability Index (HCAI)* measures the probability that mortgage borrowers will become delinquent on that mortgage for 90 or more days, which we refer to as the default risk. This measure indicates that the probability of default rose from 12 percent in 2001 to a peak of 16.5 percent at the end of 2005/beginning of 2006, before declining to the current level of 5 percent. Stated differently, lenders are currently taking less than half the credit risk they were taking in 2001, a period of reasonable credit standards.”
What does this mean?
Goodman and McCargo 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.”
The housing market boom and bust caused many mortgage providers and lenders to tighten their lending standards in an effort not to repeat the recent past. This paired with many homebuyers disqualifying themselves before they even apply for a loan, due to the fear of rejection, has led to many households not yet becoming homeowners.
Ultimately, having the right real estate professional at your side can mean the difference between becoming a homeowner or simply writing your dream off.
Skyrise Real Estate Group has been assisting folks in Silicon Valley through all market phases of the economy. Find out how we can make the difference for you. We keep our hands in the housing stream so that you don’t have to get wet.
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