I believe the housing market will remain robust for years to come, and here’s why: getting a mortgage these days is like pulling teeth. Lenders are only giving loans to those with top-notch credit and at least 20% down payment. This makes it unlikely we’ll see a wave of defaults in the future.
I recently went through a grueling mortgage refinance process. It was a real eye-opener, showing me that only the most financially secure people are getting loans and refinancing. Even someone like me, with assets ten times the amount to be refinanced, had a tough time. So, you can imagine what others are going through.
There was a time when risky loans were common. But those days are long gone. Now, getting a mortgage is as tough as ever. As interest rates have risen, the number of people who can qualify for a mortgage has decreased. Lenders are also being more cautious in case the economy takes a downturn.
But this isn’t necessarily a bad thing. As a homeowner, you want other well-qualified buyers to get a mortgage. This helps prevent a repeat of the 2008-2010 housing crisis.
Let me share my recent experience trying to get a mortgage. Despite having a credit score over 820 and a low debt-to-equity ratio, it was a real struggle.
If you’re planning to buy a property, make sure you get a pre-approval letter from your bank. This shows sellers that you’re serious and capable of getting a loan or paying cash for the property.
I decided to go with Citibank for my mortgage. Despite never missing a mortgage payment in 11 years and having more assets than the mortgage amount I was seeking, they still gave me a hard time.
My first attempt at getting approval was rejected after two weeks. They disregarded all my online business revenue and consulting income because they weren’t at least two years old. They only included 75% of my rental income to account for expenses and vacancies, even though I’ve never had a month of vacancy for my primary rental in nine years. They also disregarded all my deferred income from my old employer of 11 years.
Because I was denied a loan, I didn’t bid with confidence on the first home I was interested in. As a result, I lost it.
I wasn’t happy that my loan was rejected, so I contacted my personal banker to find another way. I was put in touch with another mortgage officer who was much more organized and responsive.
We decided to do an Asset Based Income analysis to supplement my current income. After about 10 days, I was approved for a loan. But there were still 21 more conditions I needed to meet according to the underwriter.
The process was so frustrating that I considered just paying cash to avoid the hassle. But I decided to stick with it.
In the end, I learned that getting a mortgage is a long and difficult process. Borrowers today are much more qualified than those in the past. This means the next housing correction will likely not be as severe as the one in 2007-2010.
If you have a steady income, are patient and organized with your finances, and have a credit score above 729, you should be able to qualify for a mortgage. But it’s important to have a large cash buffer just in case.
You don’t want to find your dream house and then not be able to put in a strong bid because you’re unsure about getting a loan. So, start looking for a good mortgage officer a month before you’re serious about buying a home. Being prepared is key to success!
And remember, shopping around for a mortgage is crucial. Online platforms are the easiest way to compare rates and lenders all in one place.
Investing in real estate is a great way to diversify your portfolio. If you don’t have the down payment to buy a property or don’t want to deal with the hassle of managing real estate, consider real estate crowdsourcing. It allows you to invest beyond just where you live for the best returns possible.
In conclusion, getting a mortgage is tougher than ever. But this is good for the long-term health of our country. It also means that well-qualified borrowers are getting mortgages at lower rates than average. So, it’s worth it to get your credit score and finances in order.
