It’s as if Uncle Sam is teasing us with his low mortgage loan rates and rock bottom housing prices. Sure, the ground is ripe for homeownership, however almost a quarter of the mortgage applicants who go for a mortgage are turned down.
The Federal Reserve says that only highly qualified borrowers are being welcomed into the mortgage loan pool - and many are still struggling to get the best rates.
The NAR’s (National Association of Realtors) chief economist, Lawrence Yun says that even some of the highest rated borrowers are being shut down for mortgage loan acceptance. "Good borrowers with one or two blemishes on their credit are being denied credit.”
In fact the average credit score has increased from 720 to 760 today. Even the average FHA mortgage loan credit score has risen from 660 to 700. In the past borrowers could land a mortgage loan with 620 or less, today an applicant with a score under 620 is a dinosaur.
Another factor influencing the mortgage application acceptance rate is down payment. After the sub-prime era which left plenty of mortgage brokers belly up, lenders are taking extra steps to protect themselves by asking for a 20% down payment.
In a down economy, requiring borrowers to furnish a couple hundred thousand dollars to receive a loan seems absurd to many borrowers and many mortgage brokers. Economists contend that high down payment demands is shrinking the pool of applicants and reducing home demand and prices.
Mike D’Alonzo, president of the National Association of Mortgage Brokers finds the situation to be frustrating. "We feel it really reduces the demand for houses. It's an unbelievable buyer's market, but there hasn't been as much activity as you would expect because not as many people qualify for loans."
The Mortgage Loan Numbers May Not Tell the Entire Story
Despite low prices, low rates and high inventory, mortgage loan application activity dropped 9.6% in February with 39% of all purchases coming from distressed properties and 33% of those purchases were cash transactions.
Mortgage Bankers Associations VP/research and economics Michael Fratantoni says, “The pool of borrowers who have both the incentive and the ability to qualify for a refinance continues to shrink. Overall, purchase volume remains relatively low by historical standards.”
However, industry experts contend that recorded purchases don’t tell the entire story. Many believe that consumers have become overly gun shy when it comes to even applying for a mortgage. Mortgage broker, Alan Rosenbaum, CEO/GuardHill Financial says, "A lot of people know it's very difficult to get a mortgage and they're not even trying.”
If You Don’t Succeed, Try Again
Many potential mortgage loan applicants may be missing the boat after inquiring with only one mortgage broker. Not all mortgage loan applicants are created the same…and neither are all mortgage brokers.
Despite the mortgage application doom and gloom in the news, borrowers are finding that some mortgage brokers are more flexible than others. Additionally, many mortgage brokers will work closely with the borrower to detail a road map to success.
If you are not ready to qualify for a mortgage loan today, a good mortgage broker will provide you with step by step detailed instructions how you can improve your credit, save money for a down payment and when to begin the house hunt.
Unfortunately, once many applicants have had a bad experience with one broker and are turned down, they believe that mortgage broker’s attitude resonates throughout the industry. This simply isn’t true. Hundreds of mortgage brokers are waiting to help put prospective homeowners get on the path to home ownership.
How do you find a qualified mortgage broker?
- Ask friends, family or neighbors who they worked with and if they had a good experience
- Contact local mortgage brokers who may not be associated with large conglomerates
- Ask a Realtor or title company for a referral
- Inquire at your community bank or credit union about its mortgage loan program or for a referral to a local mortgage broker