- Posted July 2, 2014 by
Potential Home Buyers Facing More Obstacles in 2014
In many US cities, more than 50% of the population has a credit score below 600 which places them in a category in which they are unable to get approved for a home mortgage. As of the date of this article the base credit score needed to qualify is a 640.
In the years leading up to the mortgage meltdown of 2008, the lending process did not present many barriers for consumers. Lending guidelines were extremely lax and individuals did not have many obstacles to getting approved. Prior to 2009 potential home buyers did not have to verify income or tax return data in many cases and credit score guidelines were very low. The minimum scoring requirement to buy was a 580, and even if you were below that, sub-prime lenders, a four letter word in today's mortgage business were there to grab you up and offer you a loan at a higher interest rate.
"The pendulum has swung in the opposite direction now in regards to the lending process" says Seattle based Loan Officer Joe Tafolla. "The industry has been forced to learn from its mistakes and now there are many requirements that should have been in place from the very beginning such as income verification and a reasonable credit score guideline"
The industry has learned that it cannot afford to operate without stricter guidelines for approval, credit score requirements being one of the most important, however many feel that with certain economic struggles still lingering the process for improving your credit score to get approved for a mortgage is much more difficult.
"Achieving the American Dream of home ownership has become ever increasingly difficult due to a rise in student loan defaults, a reduction in the workforce and a lack of knowledge of the credit system" says Jesse Rodriguez, Consumer and Business Credit Expert and Amazon Best Selling Author "Knowledge is power in the world of credit and it can be a confusing place to navigate, educate yourself and find individuals or resources who are sharing accurate information. There is a myriad of misinformation out there and it can be hard to determine what is right and what is wrong."
The federal reserve recently released information that revealed that student loan debts have officially surpassed credit card and car loans in America. One-third of the national student-loan balance is held by people ages 30 to 39 which is one of the largest segments of the population looking to purchase a home for the first time.
"We are seeing more consumers coming to us with credit issues, many brought on by struggles to manage and keep up with their student loans, among other things." says Joe Tafolla "The good news is that many student loan situations can be rehabilitated, if this is done correctly you can even have all of the negative information reported completely removed". Tafolla says its important to keep your commitment to your student loan company, "if you miss a payment during your rehabilitation period you could possibly forfeit the entire agreement you made with the credit grantor to correct your credit situation."
Still though buying a home does not appear to be completely out of reach, though more effort is certainly needed today than in the past. Home Buyer Clubs as well as First Time Buyer Programs are available to help with things like down payment assistance and credit guidance. It should be a process, one with much effort to buy a home being that this is the biggest financial investment most consumers will make in their lifetime.