Bev Murray Home Buying

Buying a new home is exciting - unfortunately applying for a home loan is not!

It seems like lenders need to know every little detail about you, most banks require at least three pieces of textual evidence to validate each and every field on the mortgage application form. Many home buyers are being told by friends and family that many years ago the process was vastly less difficult when they purchased their home during that time.

Why is there so much more paperwork now when getting a mortgage?

There are two important reasons that the loan process is much more difficult for buyers of today than perhaps any other time:

1.The government has set new rules that demand that the lender proves without a shadow of a doubt that the buyer is indeed capable of paying for the mortgage.

During the housing boom before the crash, many people were “qualified” for mortgages in reality they could never pay it back. This unfortunately led to many families losing their home, the economic crash and a devastated housing market. The government wants it absolutely certain that this cannot happen again.

2. After several cycles of economic crisis, loss and taxpayer bailouts, banks are still leery of mortgage lending.

About a decade ago during the housing crisis of ‘08, banks were forced to take the job of painfully liquidating millions of foreclosures and successfully negotiated over a million short sales. Just like the government, lenders do not want people who can’t pay for their mortgage and end up in foreclosure. Additionally, new stricter regulations have been placed on the banks in an effort to make sure they are financially 'healthy' and will not collapse needing a taxpayer bailout. For those reasons lenders strive to be completely sure that the buyer is indeed able to make ends meet on their loans.

The Silver Lining

The same environment that caused the housing bust and mandated that lenders be extremely hard on home buyers qualifying for mortgages, also allows continuing low home loan interest rates. The struggle to bring the housing market back to normal was two-fold, make sure borrowers can actually make the payments, and lower interest rates to attract new buyers. While the red tape and tougher rules are no fun to deal with, the continuing low interest rates make it worth the extra work.

Those who purchased homes during those “good old days” did experience an easier mortgage application process, however they also paid more for that loan because of higher interest rates. During the 90s the average 30-year fixed mortgage rate was 8.12, and in the 2000s it was 6.29.

So instead of focusing on how awful the paperwork is now, let’s be thankful that we are still able to get home loans at historically low rates.

If have any questions about purchasing a home today contact the Murray Group.