There are still some who believe that the real estate market is dead, the financial world is in shambles and that mortgage lenders have no money to lend. Let’s just STOP right there. The truth is there is a glut of money out there from investors to loan. If you want a loan to buy a home, are employed and have decent credit scores, there is no problem at all getting a loan now. Never has been actually. And lots of people are taking advantage of the low rates now available, about 5.625% today for 30yr/fixed rate loans for both home purchase and refinances.
What has dried up though are loans to individuals who’s credit scores are lower than decent. In the past, a number of lenders extended credit to some that they probably shouldn’t have. And what followed was a large number of defaults on those loans. So loan underwriting has become somewhat more conservative is all…not the supply of money. That is actually a good thing for everyone. It got really crazy for a few years. Example: There were types of loans available from some lenders called No-Doc loans or Stated Income loans…where all the borrower had to do was “state” or essentially make up an amount of income to put on the loan application. There were no checks, no documentation on the amount stated at all. The borrower did have to have real good credit scores to get the loan. But…come on. How many people do you think abused that?
Lenders have tightened up just a bit on credit scores for loans in general and underwriting has just gone back to the basics. Yes a few people can’t get home loans that want them, but there will be less defaults, less problems, and a more stable housing market for all of us in the end.
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