Is Getting a Home Mortgage Still Too Difficult?

Are you trying to get a home mortgage and are wondering if it is still too difficult to obtain? Keep reading to learn more about mortgages today. 

Obtaining a mortgage has always been known as a tricky thing to do. The process is long and can be very confusing, sometimes making it hard for buyers to get a mortgage. You should know certain things to help and make the home-buying process easier and more accessible. 

Potential homebuyers should always be aware of mortgage lending standards and how difficult it may be to obtain a mortgage. Credit availability is expanding, and it may be easier to get a mortgage now than before. Be aware the market is still tight, and you may have to work around it until you find the lender that works with what you need. 

With all the standards and requirements, the mortgage market can be strict and hard to get. Chances are you will need to apply for a mortgage, so finding the right mortgage and finding a lender with the best rates and costs is essential. This process can be daunting but check out how to obtain a mortgage and keep reading to learn about why mortgages are difficult. 

Here is about home mortgages and if they are difficult. 

1. What Has Happened to Mortgages?

Due to lending companies' high standards and requirements, the number of mortgages that have been given has decreased over the years. According to the Housing Financial Policy Center, about 6.3 million fewer mortgages were given out, and that is because of the strict regulations and policies. The mortgages would only be granted to ones who were within the guidelines and when the standards were more reasonable. 

Mortgage companies rely on numbers to decide whether or not the buyer will be able to make the payments or not. If there is any risk, the lenders will deny any buyer easily. Credit history is a huge thing that helps lenders decide whether or not you will get the mortgage based on whether you pay back your debts, so make sure you have a clean financial history to have a better chance of getting a mortgage. 

2. The Economy and Why

The housing market has a significant impact on mortgages as well. The market has been recovering slowly, but since it has been bad recently, it has made it harder for buyers to obtain loans because the housing prices were drastically higher than usual. 

However, while the market is still getting better with positive trends and the future, fewer buyers can afford the strain on other economic factors such as jobs, homes, and everyday expenses. Living has become expensive, so that means houses are more expensive. 

After a housing market boom and bust, mortgage lenders have become more strict in their lending standards and requirements. It is not impossible to get a loan, but it is much harder for potential buyers to obtain one than before. If you stay on top of your credit and research different lenders, it can be the easiest thing for you to do to make sure you get the success of getting a mortgage. 

3. Mortgage Rates Are Increasing

As rates are increasing, buyers need to qualify for higher loan amounts to get a mortgage. Rising mortgage rates make it more difficult for buyers to afford a home and put a dent in the home-buying process that no one wants to go through. Estimate your monthly mortgage payment with a mortgage calculator. 

However, even though rates are high and increasing, there are other ways to qualify for a mortgage. Purchasing a home that is less expensive or paying a more significant down payment is the most popular option to take to help this issue. There are always going to be challenges, but these are the best ways for you to get around getting a mortgage. 

On the other hand, if you are trying to get a mortgage, it may be in your best interest to work with a trustworthy agent to find a home that is within your budget because being more realistic with your costs can help you get the mortgage for the home of your needs. Not everyone can buy their dream home, so be flexible. 

4. Mortgage Lenders Have Strict Requirements

Mortgage lenders have become much stricter than before with their requirements, which makes it much more challenging for potential buyers to obtain a mortgage. In the past, buyers would get approved with a lower credit score and down payments, while now most lenders will require a credit score of at least 700 and a down payment of about 20%. 

The best way for buyers to get a mortgage with all these strict requirements is to make sure you fix your financial history and credit as well as save more for a bigger down payment. These two ways will help your process of getting a mortgage easier and more accessible. 

Keep in mind that some lenders work with people with lower credit scores and those who can not put down large down payments, but keep in mind these companies usually have higher interest rates and more strict terms and rules, so just be aware. 

5. Buyers Need Larger Down Payments

As mentioned earlier, the rising mortgage rates make it harder for a buyer to afford a home, so one of the ways to obtain a mortgage is by making a larger down payment, which will lower the monthly mortgage payments. 

However, larger down payments may not always be in the books for everyone and may be out of reach for people who can only put less than 20% down. Some programs can help, such as FHA loans, so if you are interested, know your options that are there to help you.

Not everyone can afford the strict financial requirements of the mortgage industry that we live in, so many programs help borrowers get what they need to get a mortgage. Find the best program and help if you need it.  

6. Buyers Can Get Pre-Approved

A pre-approval is when a lender estimates how much they will lend you based on your income and credit score. Getting pre-approved can help potential buyers know what they can afford and make the home-buying process more accessible. 

Keep in mind that qualifying for a pre-approved is not as easy as it seems. Lenders do require the buyers to provide a lot of documentation, such as pay stubs and tax returns. This may be harder for people who are self-employed or have different and unique financial situations. 

Pre-approvals are also not always 100% accurate. If the lender does not have all the documentation and everything they need, they may approve the buyer a loan that is bigger than they should have, and then the buyer will be left with a mortgage they cannot afford, so just be aware. 

7. Getting a Mortgage

Although, after everything, it may seem like getting a mortgage is impossible, it is possible; it just may be challenging, especially with the current interest rates and lender requirements. The buyers may just need to take more steps to help their chances of getting approved for one. 

Here is an overview of some things you may do to make getting approved for a mortgage easier. There are many resources to use to help you. 

• Getting pre-approved
• Having a larger down payment
• Fixing your credit score/financial history
• Look for financial programs
• Consult with a professional

You also need to be aware of mortgage insurance or private mortgage insurance and whether you need it. These two have many differences, and they can be hidden costs. 

Mortgage Insurance

Mortgage insurance is in place to protect the lender if the homeowner stops making payments on the home. The lender assumes that there is a risk with the buyer, especially if they put under 20% down. If that happens, the lender uses the funds they have collected from the mortgage insurance payments to use towards the purchase of the home. 

Private Mortgage Insurance (PMI)

If private equity provides the insurance, it is called private mortgage insurance or PMI. An FHA or USDA loan always requires mortgage insurance, even if they put in more than 20%. With a conventional mortgage, the lender will require the buyer to pay for private mortgage insurance if they put less than 20% down.

However, a VA loan does not require mortgage insurance, but it requires a "funding fee," which is a one-time payment made by the borrower. The Department of Veterans Affairs backs the VA loans, so the funding fees protect them if the borrower can not repay the loan. 

Methodology

We used information and trends from different sources to find out why mortgages are difficult to obtain and how to get a mortgage. There were many various data to use, and overall, they are all based on current numbers and trends. 

• Consumer Financial Protection Bureau
• Housing Finance Policy Center
• Investopedia
• Wall Street Journal

FAQS

Is it impossible to get a mortgage?

It is not impossible to get a mortgage, but it is difficult for potential home buyers. Making sure you stay on top of your credit and are in a good financial position are two easy ways to be approved for a loan. 

Why is it so hard to get a mortgage today?

Because of the home prices and high-interest rates, they are pushing up monthly payments, making it harder for buyers to get a mortgage to start. 

Why is getting a mortgage so complicated?

Mortgage lenders have become much stricter with their requirements, which makes it more difficult and confusing for buyers to qualify. In the past, borrowers could get approved with lower credit scores, but now they require at least a 700 credit score and a down payment of about 20%.

What is the 28/36 rule?

The 27/36 rule is that you spend no more than 20% of your gross monthly income on housing costs and no more than 36% on all your debt combined, including housing costs. This is a way to determine your income and affordability. 

Is Getting a Home Mortgage Still Too Difficult - The Bottom Line

Getting a mortgage has always been challenging. The process is lengthy and complicated, which can make it difficult for buyers to obtain one. However, there are certain things that you should be aware of to make the process less complicated and more accessible.

With all the standards and requirements, the mortgage market can be strict and hard to get. Chances are you will need to apply for a mortgage, so finding the right mortgage and finding a lender with the best rates and costs is essential.

It is important for those who are looking to buy a new home to be mindful of the lending criteria and how challenging it can be to secure a mortgage. Although credit availability is increasing, obtaining a mortgage may still be difficult due to the tight market. You may need to put in some extra effort to find the right lender who can meet your specific requirements.

If you are considering moving or selling, contact us or visit our website. Our team at Raleigh Realty is here to help you with any home buying or selling needs.