While America’s demand for mortgages has gone up this summer, the banks still haven’t budged much on their tightened lending standards, CNN recently reported.
The Federal Reserve recently announced that an increasing number of Americans have a renewed interest in taking out mortgages — the highest level in three years. About three in five banks reported an increase in demand for home loans. But the tighter lending restrictions that went into place following the housing crisis remain, making it difficult for the average consumer to get a mortgage. The Mortgage Bankers Association reports that more than 30 percent of consumers who apply for mortgages won’t get them. That means that while Americans may want to buy homes, they can’t get mortgages for them.
Even with that, the time to buy is now for many Americans. Home prices are still low, but experts have seen them creeping up in the past months. The sales of foreclosed homes have shrunk, while the market has seen a surge in non-distressed homes hitting the market. Even though the mortgage stall is dismal for the average home buyer, it could mean good things for the economic recovery as a whole. The appetite for homes is on the rise, meaning that more and more consumers are willing to take the risk.
Preparing to Buy a Home
For those potential home buyers who are seeking mortgages but afraid to dip a toe into the pool, it’s now time to take an in-depth look at your finances. There are some simple steps to ensuring you are on the right path:
- Review a copy of your credit report and make corrections: Dispute any mistakes on your report, and allow at least one month for the changes to take place. Even the slightest changes and corrections can make a marked improvement on your report.
- Work to improve your credit score: Low credit can be the downfall of any new mortgage application in this economy. Build your credit slowly.
- Shop around: It’s important to get the lowest interest rate, and a good credit rating will insure that. With interest rates for 30-year fixed mortgages hovering at about 4 percent right now, it’s a good time to shop. Go to national and local banks, and review your options.
- Save your money: Gone are the days of no-money-down mortgages. Plan to set aside up to 20 or 30 percent of your new mortgage. A good time to do this is while you are repairing or building your credit score.
At the same time the Federal Reserve reported the bittersweet news about mortgages, it said that several national banks have eased the standards on auto and credit card loans. Again, analysts see this as a positive move for economic recovery.
Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].