One of the major contributors to the real estate market crash was the lax lending policies and regulations that allowed just about anyone to secure a home loan. As many of these people became unable to pay their mortgage rates, the housing market completely crashed and foreclosures across the country drastically rose. However, it appears as though getting a home loan nowadays poses the opposite extreme—it is nearly impossible.
Home loan interest rates are at an all-time low and foreclosed properties have drastically decreased the price of purchasing a new home. The low prices and interest rates coupled with a decrease in the unemployment rate would seem to drastically increase real estate being sold—but does it? The short answer is no.
Potential homeowners are having a very hard time getting their home loans approved unless they have a flawless record with a very high credit scores. A recent report from the Federal Reserve indicates that only ¼ of those that apply for home loans are being approved for financing. The only thing more damaging to the real estate market than these ridiculous standards on receiving a loan are the rumors of an inability to receive approval that prevent most Americans for even attempting to apply for home loans.
It is essential for lenders to realize that taking the other extreme and preventing great buyers with a couple of imperfections in their credit history from receiving approval will only keep the real estate market in limbo. The great news is that people want to buy homes; the bad news is that many qualified buyers cannot get approval for financing, which is essential for new home purchase in a difficult economy. In the end, there has to be a balance on loan approval standards before the market can make a quicker recovery and move back toward stability.
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Written by Alex Rolim.
