Homeowner Headquarters

How to's and money-saving tips from resident homeowner and mortgage professional, Cathy West

Why is it still so hard to buy?

Over the past several years, millions of Americans have likely been in a position where they may have wanted to buy a home, but have not been able to do so for a number of reasons. The fact of the matter is that, historically speaking, it has probably never been more difficult to get into the market in this way. Consequently, people who are looking to make a purchase – even now, years after the recession officially came to an end – may need to understand the potential hurdles they face.

The biggest of these is, of course, the fact that lenders have kept mortgage qualification standards so high for so long. At this point, the market has been dealing with extraordinarily strict restrictions on who can buy for about nine years, and unfortunately there aren't many signs that things are going to change any time soon. That could be a bit of a discouragement to would-be buyers, but the more they can do to prepare for a home purchase, the better off they're going to be.

Big obstacles
The first issue here is those qualification standards, and that means consumers will have to ready themselves in any way they can. This will probably include finding ways to improve their credit scores to be among the very best achievable by normal standards (boosting them at least into the low 700s, if not higher). Furthermore, they should also try to reduce their debt as much as possible, while also building up tens of thousands of dollars in savings to make a down payment.

In addition, though, would-be buyers may also have to deal with somewhat constricted buying markets, depending upon where they live. That's because there are two types of markets where their options for buying properties may be a little limited: those with extremely low property values (because many owners may still be dealing with marginal or negative equity and therefore can't sell) and those with high prices (because most people probably can't afford to buy there).

When will it change?
Even now, refinance activity makes up the majority of all mortgage originations seen nationwide, though that majority has admittedly narrowed in the past year-plus. As a result, many experts have conjectured that, for purchase mortgage standards to start declining in earnest, there must first be a more dramatic increase in mortgage rates to effectively price refinancers out of the market in bulk.

At that point, the benefits of buying should start to decline in some ways (though it's difficult to predict when this will happen, or how home prices will be affected), but it will allow more people to get into the market. And even if rates rise by half, they will probably still be affordable in comparison with historical or even pre-recession norms. That, in turn, should provide many hopeful buyers who may still be locked out of the market with access to solid deals.

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