There is no doubt that getting a mortgage is easier today than it was right after the housing crash a decade ago. However, the easing of credit availability has led to some questioning of whether or not we are headed for another housing crisis.
Let’s put everything into the proper perspective.
Mortgage Credit Availability Over the Last Three Years
Getting a home mortgage has definitely gotten easier over the last three years as evidenced by theMortgage Credit Availability Index, issued by the Mortgage Bankers Association, in the following graph (the higher the index, the easier it is to get a mortgage):
However, if we look further back at the index we see quite a different story.
Mortgage Credit Availability Today Compared to 2006
In many markets across the country, the amount of buyers searching for their dream homes greatly outnumbers the amount of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.
Even if you are in a market that is not as competitive, knowing your budget will give you the confidence of knowing if your dream home is within your reach.
Freddie Mac lays out the advantages of pre-approval in the My Home section of their website:
“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you
The interest rate you pay on your home mortgage has a direct impact on your monthly payment; The higher the rate, the greater your payment will be. That is why it is important to look at where the experts believe rates are headed when deciding to buy now or wait until next year.
The 30-year fixed mortgage rate has fallen half a percentage point since the beginning of the year and has remained at or below 3.5% for the last 11 weeks according to Freddie Mac’s Primary Mortgage Market Survey.
The chart below shows how far rates have fallen this year (on the left), and uses an average of the projections from Freddie Mac, Fannie Mae, the Mortgage Bankers Association and National Association of Realtors (on the right). As you can see, interest rates
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There are some that think that housing affordability is a challenge. Historically, that’s not true. Others think that home prices are approaching bubble values. If we look back over the last sixteen years, that is also not the case. As a matter of fact, the numbers show that the U.S. residential real estate market is doing just fine.
Here are two articles and excerpts that make this point:
The Housing Market Is Finally Starting to Look Healthy – The NY Times
“It has been an excruciatingly long time coming, but the housing sector in the United States is finally getting healthy. Thank millennials and thank homebuilders who are starting to produce more of the starter houses young people demand.”
There are some industry pundits claiming that residential home values have risen too quickly and that current levels are on the verge of another housing bubble. It is easy to see how this thinking has taken form if we look at a graph of home prices from 2000 to today.
The graph definitely looks like a rollercoaster ride. And, as prices begin to reach 2006 levels again, it “seems logical” that the next part of the ride would be downhill. However, this graph includes the anomaly of the price bubble and the correction (the housing crash).
What if the bubble & bust didn’t occur?
Let’s assume that instead of the rise and fall in home prices that we saw last decade, we just had normal historic appreciation from 2000 to today. According to the
We are often asked why there is so much paperwork mandated by the bank for a mortgage loan application when buying a home today. It seems that the bank needs to know everything about us and requires three separate sources to validate each and every entry on the application form.
Many buyers are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago.
There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.
1. The government has set new guidelines that now demand that the bank prove beyond any doubt that you are indeed capable of affording the mortgage.
There are many benefits to homeownership. One of the top ones is being able to protect yourself from rising rents and lock in your housing cost for the life of your mortgage.
Don’t Become Trapped
Jonathan Smoke, Chief Economist at realtor.com, reported on what he calls a “Rental Affordability Crisis.” He warns that,
“Low rental vacancies and a lack of new rental construction are pushing up rents, and we expect that they’ll outpace home price appreciation in the year ahead.”
In the Joint Center for Housing Studies at Harvard University's 2015 Report on Rental Housing, they reported that 49% of rental households are cost-burdened, meaning they spend more than 30% of their income on housing. These households struggle to save for a rainy
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