As we all expected, the pendulum has swung. We certainly needed the correction . . . the banks had been way too liberal in the early 2000’s and that’s how we got into this mess. But it seems the pendulum has swung too far in the other direction now.
With the economy still in a wobbly position, mortgages need to be easier to get, not harder. But the opposite is the case. The ten largest mortgage companies denied more mortgages (over 25%) in 2010 than in 2009. That number was closer to 30% in Indiana. A recent Wall Street Journal article shows the percent of mortgage denials on a state-by-state basis, and you might be surprised at which states come in with the highest % of denials. Here’s the link to the article: http://online.wsj.com/article/SB10001424052702304569504576405660006330644.html?mod=djemRealEstate_h
The main reasons cited for loan denial were: insufficient collateral, poor credit and inadequate debt-to-income ratios. Even those with decent credit scores are being denied. Something’s gotta give! This bleak situation is dissuading even capable buyers from attempting to obtain a mortgage.
I guess it’s good news for those of us who invest in rental properties . . . People aren’t buying homes right now. Either they can’t, or they’re concerned about the economy and are waiting. So, they’re choosing to rent. So as investors, if we have absolutely great credit and can get a mortgage, or if we have cash to buy a great rental, life is good!
The rental market is strong and will remain strong for several years. The housing market will lag behind the job market and economy as a whole, and the banks aren’t doing the housing market any favors by being stingy with their loan money.
It’s a vicious cycle . . . sigh . . . onward and sideways?