Why It’s Tougher To Get That Home Loan

Mortgage rates continue to be ridiculously low, hovering around 5%. Rates are great. Home prices are low. It’s a perfect storm for buying a house, right? You’d think. Trouble is, so many people can’t land a loan. I hang around realtors a lot (my wife is one), and I’ve heard more than once how difficult it is to borrow money.

Tighter Restrictions

These days, only qualified borrowers get financing.  CNNMoney.com reports that nearly a quarter of loan applicants are denied, according to Federal Reserve stats. Lawrence Yun, chief economist for the National Association of Realtors, says tighter restrictions have made it next to impossible for some to qualify for a mortgage. He told CNNMoney.com, “Good borrowers with one or two blemishes on their credit are being denied credit.”

Down payments going up

Another factor keeping people out of the mortgage market… lenders now require more up-front cash. Remember when you used to have to come up with a lot of money for a down payment… as much as 20%… to get a loan? Then, during the housing boom, it was practically nothing. We’re back to what it used to be… the median down payment for a purchase is about 15%.

All of this… the bigger down payments and better credit… may help clean up the recent housing mess, but it’s also shrinking the number of eligible buyers. It doesn’t matter how ridiculously low rates go if you can’t land that loan.

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