Is Getting a Home Mortgage Still Too Difficult?
It's no secret that securing a mortgage is difficult. The process is long, paperwork-heavy, and can be confusing. But is it still too difficult for buyers to get a mortgage? Some things make the process easier—like online lending platforms and pre-approval processes. But there are still some hurdles buyers will need to overcome. Here is what makes it difficult for homebuyers to get mortgages and ways agents and buyers can work together to make the process easier.
Mortgage Rates Are Rising
Rising mortgage rates make it more difficult for buyers to afford a home. As rates increase, buyers need to qualify for a higher loan amount.
While rising mortgage rates make it difficult for buyers to afford a home, there are still ways for them to qualify for a mortgage. Purchasing a less expensive home or paying a larger down payment are options. Both present unique challenges, but they may be the only way for some buyers to qualify for a mortgage.
To combat rising mortgage rates, buyers can work with their agents to find a home within their budget. By being realistic, buyers can avoid ending up with a mortgage they can't afford.
Mortgage Lenders Have Strict Requirements
Mortgage lenders have become stricter in their requirements, making it more difficult for buyers to qualify. In the past, borrowers could get approved with lower credit scores and down payments. Now, most lenders require a credit score of at least 700 and a down payment of 20%.
Some lenders will still work with buyers who don't have perfect credit or a large down payment. However, these loans usually have higher interest rates and stricter terms.
The best way for buyers to overcome this obstacle is by using tips on repairing credit. Additionally, they can start saving for a larger down payment. This way, buyers will be better positioned to get approved for a mortgage with favorable terms.
Buyers Can Work to Get Pre-Approved
A pre-approval is when a lender estimates how much they are willing to lend you based on your income and credit score. Getting pre-approved can help buyers know what they can afford and make the home buying process more manageable.
However, getting pre-approved is not always easy. Lenders often require potential borrowers to provide documentation, such as pay stubs and tax returns. This can be difficult for buyers who are self-employed or have complex financial situations.
Additionally, pre-approvals are not always accurate. If a lender does not have all the necessary information, they may approve a buyer for a loan that is too large—leaving them with a mortgage they can't afford.
Buyers May Need a Larger Down Payment
As mentioned, rising mortgage rates make it more difficult for buyers to afford a home. One way to offset this is by making a larger down payment, which will lower monthly mortgage payments.
While a larger down payment may seem out of reach for some who can only put less than 20% down, programs can help. For example, an FHA loan allows buyers to put down as little as 3.5%. If you've considered this option or asked yourself, "Is a FHA loan right for me?" this could be a promising option.
Getting a Mortgage Is Still Possible With the Right Approach
Although it may seem challenging to get a mortgage, especially with the current interest rates and lender requirements, buyers can take steps to increase their chances of being approved. Getting pre-approved is one way to show that you are serious about purchasing a home and have the financial resources. Having a larger down payment also helps demonstrate your commitment to the purchase. By following these tips and working closely with a qualified mortgage lender, you can get the mortgage you need to buy your dream home.