Low Credit Scores Limit Homebuying Activity
Tough Economy Has Greatly Affected People's Credit and Buying Power
Posted on December 06, 2011 by Glen Gunner.
For the past few years, this country has been mired in a terrible economy, and the housing industry has suffered right along with it. Millions of homeowners have fallen behind on their mortgage payments, and many are losing their homes every day due to these mortgage defaults. This has created one of the best buyer's markets seen in the U.S. housing industry over the past several decades, yet buyers are still slow to come into the fold; even with low home prices and historic home loan interest rates, the housing market is showing few signs of recovering from the current doldrums. While there are many factors associated with the current state of the housing industry, a recent article in the Los Angeles Times highlights a big reason why many people interested in purchasing a home cannot get a loan to complete the purchase.
The title of the article says it all: "Lower credit scores slow housing recovery by thwarting sales." The rough economy of the past few years has significantly affected peoples' incomes, creating a downhill effect where lower incomes and job losses have lead to people being unable to afford their monthly bills - everything from mortgage payments to paying the electric bill has become challenging for millions of Americans. After the housing bubble burst a few years ago and tons of distressed properties (short sale and foreclosures) began flooding the marketplace and portfolios of mortgage lenders, the lending institutions tightened their purses and have made it increasingly difficult to qualify for a home loan. According to the article, the major federal home loan institutions that purchase or guarantee home loans (FHA, Fannie Mae, and Freddie Mac), have all raised their average required FICO scores to combat the onslaught of bad loans given during the housing boom by unscrupulous lenders. While it is good to see these institutions finally caring about the credit-worthiness of buyers looking for a home loan, these new policies leave many potential buyers hurt by the economy out in the cold. For buyers who are thinking about purchasing Laguna Beach real estate, it is very important to review your credit report ahead of time to see what can be done to increase your score. A good FICO score has increasingly become more important in the loan approval process, so it is vital to begin the process with a good score so that you give yourself a better chance at securing your home loan.
This is a difficult time for everyone, and people looking to purchase a Laguna Beach home or condo need to take the necessary steps to ensure that their home purchase will go as smoothly as possible. Don't leave things to change...order your credit report and meet with a lender to see what you qualifications look like for securing a home loan. If you have questions about the Laguna Beach real estate market or the housing industry in general, please do not hesitate to contact us.
