Credit is Tight!
Credit is tight, even for Former Federal Reserve Chairman Ben Bernanke!
Low interest rates should mean that opportunity is in abundance for the real estate industry. However, if you can't qualify for a mortgage, even the lowest rates don't help you if you want to finance or refinance your home.
This point became significant when the news was announced that even the former Federal Reserve Chairman, Ben Bernanke, was turned down when he went to refinance his home. Mr. Bernanke was at a conference and shared with moderator Mark Zandi of Moody's Analytics that he, "recently tried to refinance my mortgage and I was unsuccessful in doing so."
He then went on to say that lenders, "may have gone a bit too far on mortgage credit conditions."
Although the point was made that perhaps a deal could be found elsewhere, that wasn't really the point. The point is if a former Federal Reserve Chairman can't refinance his home, what does that mean to the average homeowner?
While some say that credit is easing, the proof is not in the number of approvals but in the number of disapprovals. There were a greater number of people with credit scores under 660 who qualified for a mortgage in 2000 than now according to the Urban Land Institute. According to their figures as reported by NAR, in 2013 only 13% of buyers had a FICO credit score under 660 while in 2001 it was 25%.
As an agent one of the best things you can do to help your clients is to encourage them to be assertive when shopping for money. Most buyers spend most of their house purchase energy on the selection of the house but it is the selection of the right lender or the right money that is just as important. That one decision will affect your financial future for life of the loan - which could be 30 years!
Here is sound advice for your buyers who are having trouble getting approved:
Just because one lender declines you does not mean your buyer cannot get financing. It means that lender may have a particular requirement that your buyer does not meet. Every lender has different lending requirements so it is essential that your buyer ask questions prior to going through the lengthy application process.
If your buyer has been turned down by one lender be very honest with the next lender before the buyer applies. The buyer should let them know why they were turned down and ask the lender if they can help. The buyer is better to ask a lot of questions before they put themselves in the position to be turned down again.
Your buyers should visit a local lender or credit union and see if they have programs that can better suit their needs. Many local lenders do not have the same strict requirements that national lenders do.
Don't give up! Finding the right lender is about shopping around and asking the right questions. It could save your clients a lot of disappointment and a lot of money.
By Denise Lones CSP, M.I.R.M., CDEI - The founding partner of The Lones Group, Denise Lones, brings over two decades of experience in the real estate industry. With expertise in strategic marketing, business analysis, branding, new home project planning, product development, and agent/broker training, Denise is nationally recognized as the source for all things real estate. With a passion for improvement, Denise has helped thousands of real estate agents, brokers, and managers build their business to unprecedented levels of success, while helping them maintain balance and quality of life.