Buying A Home

Is Getting a Home Mortgage Still Too Difficult?

Getting a Home Mortgage

There is no doubt that mortgage credit availability is expanding, meaning it is easier to finance a home today than it was last year. However, the mortgage market is still 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:

  1. 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).
  2. The concern about potential litigation for imperfect loans.

What has been the result of these concerns?

6.3 Million Less 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.”

The cost to the economy if we’re writing fewer loans…

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…...

3 Questions to Ask Before Buying Your Dream Home

3 Questions to Ask Before Buying Your Dream Home

If you are debating purchasing a home right now, you are probably getting a lot of advice. Though your friends and family will have your best interest at heart, they may not be fully aware of your needs and what is currently happening in the real estate market.

Ask yourself the following 3 questions to help determine if now is actually a good time for you to buy in today’s market.

1. Why am I buying a home in the first place?

This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with money.

For example, a recent survey by Braun showed that over 75% of parents say “their child’s education is an important part of the search for a new home.”

This survey supports a study by the Joint Center for Housing Studies at Harvard University which revealed that the four major reasons people buy a home have nothing to do with money. They are:

  • A good place to raise children and for them to get a good education
  • A place where you and your family feel safe
  • More space for you and your family
  • Control of that space

What does owning a home mean to you? What non-financial benefits will you and your family gain from owning a home? The answer to that question should be the biggest reason you decide to purchase or not.

2. Where are home values headed?

According to the latest Home Price Index from CoreLogic, home values are projected to increase by 5.3% over the next 12 months.

What does that mean to you?

Simply put, if you are planning on buying a home that costs $250,000 today, that same home will cost you an additional $13,250 if you wait until next year. Your down payment will need to be higher as well to account for the higher home price.

3. Where are mortgage interest rates headed?

A buyer must be concerned about more than just prices. The ‘long term cost’ of a home can be dramatically impacted by even a small increase in mortgage rates.

The Mortgage Bankers Association (MBA), the National Association of Realtors, Fannie Mae and Freddie Mac have all projected that mortgage interest rates will increase over the next twelve months as you can see in the chart below:

Mortgage Rate Projections | MyKCM...