Over the past several years, one of the big issues in the housing market overall has been the fact that millions of Americans were effectively locked out of the homebuying process. This is often due to financial issues that arose through no fault of the consumer, but nonetheless prevents them from getting involved in the sector. To that end, many experts believe that the practices of these financial institutions have hindered a broader recovery for both the housing market itself, and the economy as a whole.
However, one must keep in mind why lenders are keeping their mortgage restrictions so tight, even after years of economic recovery would lead observers to believe they should have been relaxed. These financial institutions were very badly burned when the recession hit, because millions of Americans slipped into delinquency and default on their mortgages. To some extent, this should have been expected, because lenders were far too free with mortgage credit, and as such the market collapse is largely their fault. But as far as today's conditions go, their reluctance to re-expand mortgage credit access is at least somewhat understandable.
What goes into the process?
Because millions of homes across the country slipped into foreclosure during and even after the recession, lenders remain at least somewhat reticent to re-expand mortgage credit access. The only types of home loans on which the industry has moved to ease restrictions in earnest is for jumbo mortgages – those for homes with big price tags which, for obvious reasons, only tend to be purchased by affluent shoppers in the first place.
But even as the economy has improved, the restrictions have not relaxed. Lenders certainly remain concerned about consumer delinquency and default, but there may be a larger worry looming: governmental oversight. Since the recession ended, the federal government has moved to put greater effort into making sure consumers are able to actually afford the mortgages they've been granted.
What's the issue?
In fact, rules put into place at both the state and federal level created situations that may make it difficult for financial institutions to feel as though they can more broadly open up mortgage restrictions. That's because mortgage lenders not only have reason to continue to be worried about the threat of delinquency and default, but also the idea that if a homeowner falls behind, those institutions could also be subject to both the financial and regulatory implications of that shortcoming.
On the other hand, some experts believe this concern is overstated, because mortgage credit is currently far more restrictive than it was when the recession hit. Some estimates show it's as much as seven or eight times more difficult to get a mortgage. But those consumers who can actually qualify – with a combination of strong financial standing and a great credit score – will likely be able to lock in extremely low rates and prices alike.
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