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Nearly a third of Americans wouldn't qualify for mortgage

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Mortgage Professional America | 27 Sep 2013, 07:00 AM Agree 0
Even with the housing market on the mend and rates dropping, three out of 10 Americans are unlikely to qualify for a mortgage, according to an analysis released Thursday
  • Andy Zook | | 27 Sep 2013, 09:18 AM Agree 0
    Does this surprise anyone? Not everyone SHOULD own a home. Many individuals/families do not have the financial stability to take on the responsibility of home ownership. I am in the mortgage business, if you have a 620 credit score or lower, you have already demonstrated that you do not have the financial stability necessary for home ownership. This is not meant to be a knock on these families - just a recognition of economic reality. Good jobs are tough to find, wages are falling, health insurance coverage lacking, lack of savings. I see many clients who are really just getting by paycheck to paycheck. One hiccup and they are in real trouble. The historical rate of home ownership has been in the mid 60% range. During the last housing bubble when everyone could get a mortgage, regardless of credit score, income no assets, etc., the home ownership rate rose to approximately 70%. That did not end well for those families that were truly on the margin or most other home owners as well.
  • Elaine R | | 27 Sep 2013, 09:19 AM Agree 0
    I've been in the business since long before FICO scores. Back in the "old days", it was a given that 30% of the pipeline would not get approved. Funny how the old standard is back. At least something is returning to "normal". Not everyone can get, nor are they entitled to a mortgage, but at least the market place set the standards and things ran well until the advent and endorsement of Subprime mortgages by FNMA itself. Of course, they'll never admit that they're responsible for any of it.
  • Steve Felt | | 27 Sep 2013, 09:24 AM Agree 0
    Although we have access to private lenders that can do the sub-prime borrowers if they need to refinance or want to buy.
  • Ben Link | | 27 Sep 2013, 09:45 AM Agree 0
    Maybe if you have bad credit, it should be harder to qualify for a mortgage. The belief that everyone should qualify for a mortgage, regardless of past credit performance, is one of the reasons we ended up in the mess we did.

    That being said, if you have a 620 credit score and a minimal down payment (3.5%), there are many sources of mainstream financing available at great rates.

    You won't find them at your local bank. You need to contact a mortgage broker, who will likely have a number of lenders to fill this need using the government insured FHA mortgage program.

    I have been a broker for a long time. I am convinced the broker is the consumer's best friend.
  • Kevin R | | 27 Sep 2013, 10:41 AM Agree 0
    The big issue will be the 43% DTI limit. when that hits it will have a big impact on qualifying.
  • Bob Kennedy | | 27 Sep 2013, 10:46 AM Agree 0
    The first step in getting the best financing on a home mortgage involves using Lipstick before using Ink.
    Lipstick (putting lipstick on the pig - the pig being that middle credit score) on the pig facilitates an increase to the buyer's credit score. Putting lipstick on the pig BEFORE even embarking on a search for a suitable home is key. Once the lipstick exercize is done, getting prequalified with the improved credit scores may vault previously unqualified - because of low scores - buyers into qualified buyers. THEN they can confidently look for a home of their own... INK TIME, write the contract. Note: improved credit scores can generate improved pricing on home financing for most buyers, from the lender of their choice. My soon to be released book "CREDIT REPAIR - Counter-intuitive Deep Repair Secrets for improving your Credit Scores" will guide buyers to best practices for getting improved credit scores and the best pricing on their mortgages. Try it out!
    I'm a 41 year Mortgage Industry Insider who has mortgageed hundreds of millions of dollars to thousands of families since March 1972.
  • John E | | 27 Sep 2013, 11:14 AM Agree 0
    Bob, the only problem I forsee, is that most lenders do not like credit score improvement being performed on a buyer/borrower. The bureau shows inquiries for 120 days and a lender will ask for previous credit bureaus also.
  • Bob Kennedy | | 27 Sep 2013, 11:53 AM Agree 0
    That's true John, but putting lipstick on the pig can/should be done before ordering a credit report. The path to qualification does include a credit report, but if you do the "lipstick exercize" prior to visiting your intended lender, that lender will be working with a better borrower. Better scores can be the difference between qualifying or not. Better borrowers get better pricing on their mortgages. Either way, the buyer/borrower wins.
    The problem with that is that most consumers have no idea where to begin, what to do, how to do it, or the benefits involved.
  • Steve Felt | | 27 Sep 2013, 01:02 PM Agree 0
    My company is doing stated income investment properties at 70% LTV with a 650 FICO and rates starting at just under 7%. We are swamped with mortgage apps and most are getting approved. The problem is that every newbie LO is chasing the same 700+ credit borrower. After more than a decade in this business I'd never even think about chasing clients or competing with other LO's over rates.
  • John E | | 27 Sep 2013, 02:24 PM Agree 0
    Bob I agree with you on improving your borrower's credit, but you gotta start with a credit bureau from somewhere...

    Steve, you've got some good things going on your investment borrowers, especially the stated part. I've been doing this since 2002. I don't necessarily chase anyone, but you do have to try to accommodate all your borrower's. I have over 9 current that should close in the next 6 weeks and only 2 of them have above a 680. I like to hear about that stated some more. If your company takes independent brokers? I'm in the State of Indiana. Send me your e-mail address if you think that would work?
    Thanks!
  • Bob Kennedy | | 27 Sep 2013, 02:58 PM Agree 0
    I'm starting to feel like a dog with a new bone here John. Fact is that you don't start with the credit bureau. That's why I wrote about the strategy. If somebody has no idea how much they owe, and/or to whom, you would be right. I guess the starting point is to find a buyer who knows who they owe, and how much. You begin from there. The lipstick exercize improves whatever a credit report would show, but you don't order the report until you've made the adjustments to reap the best scores.
  • John E | | 27 Sep 2013, 03:11 PM Agree 0
    Steve, you've got some good things going on your investment borrowers, especially the stated part. I like to hear about that stated some more. If your company takes independent brokers? I'm in the State of Indiana. Send me your e-mail address if you think that would work?
    Thanks!
  • Steve Felt | | 27 Sep 2013, 03:47 PM Agree 0
    John, We work with Brokers and Indiana works. My email is steve@creativebusinessfinance.com
  • Stan J | | 27 Sep 2013, 06:52 PM Agree 0
    The average working family cannot compete with foreign REITs and domestic flippers. This must be cured!
  • Read | | 28 Sep 2013, 10:21 AM Agree 0
    For sure credit scores are a big issue and often do not reflect credit risk, but add to that, in rural areas with low density, it is impossible to have an appraisal which meets current standards.....hence no mortgage, this will only get worse and the 30% above understates the total problem. Plus the new Qualified Mortgage rules are going to drive the few remaining portfolio lenders out of the market.
  • Keith T | | 01 Oct 2013, 02:08 PM Agree 0
    How can lenders do stated income mortgages when
    HOEPA and the CFPB are requiring reasonably sufficient means on all residentila mortgages.
  • Steve Felt | | 01 Oct 2013, 02:46 PM Agree 0
    Lenders on investment properties aren't bound by CFPB, they are treated like commercial properties.
  • Patti | | 03 Oct 2013, 03:41 PM Agree 0
    Seriously, are you guys swapping ideas on how to cheat the system again, using their own wide open loopholes? Why do you need a stated mortgage in the first place...oh...you mean your borrower doesn't claim all his income on his taxes, or lies about the write offs, or is flat out losing money? If he will cheat on his taxes, where is the integrity to repay the obligation of his mortgage? As far as credit repair, as aggravating as collection companies are, they are seldom making false claims, yet you think your borrower has NO IDEA? Bob, I am surprised at this coming from you. Yes, credit can be erroneous, and yes credit scores can be improved, but the concept is not for everyone. with a low score. I too have many years in the business, (wholesale) . Improving the score for honest reporting errors is one thing, but who will stop there and say, "sorry folks, these are righteous debts that you owe so go on down the road"? Plueeeze! This entire conversation regarding the high priced unregulated stated income mortgage, and the lipstick on the pig comparison is sad to read. Why don't you get out of the pig pen, then you won't have to put lipstick on anything to make it look better than it is. The rest of the saying goes, "you can put lipstick on a pig, but it's still a pig" Well your slow paying borrower is still a slow paying borrower also! And your guy that needs the stated income is still not able to straight up qualify for a mortgage like the rest of the world has to do. If he could, he wouldn't pay 7% in a 4% market with 30% down. Sorry guys, I can only hope I read your comments wrong!
  • Patti | | 03 Oct 2013, 03:55 PM Agree 0
    Kevin, if you are worried about that 43% debt ratio, do the math after taxes, and ask yourself how these people are going to live after they pay the mortgage payment. I ask you again to do the math. It is astounding . Yet the industry repeats the same mistakes, year after year!
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