Obtaining a Mortgage in the Contemporary Housing Market
With interest rates predicted to soon rise and the cost of homes simultaneously increasing, many people want to get a mortgage as soon as possible.
Time is of the essence, as recent Case-Shiller housing data indicated that house prices have increased by just over 12% in the last year. However, an increase of more than a percentage point in the last three months has brought the interest rate for a thirty year mortgage to slightly more than 4.5%.
Despite these conditions and strong desire to obtain a mortgage, many people find that being approved for a home loan remains challenging. Ellie Mae Origination Insight Report data showed that the average mortgage applicant gaining approval for a standard loan had a FICO score of 759. However, people with FICO scores averaging 726 were rejected for home loans.
The upshot of this is that approximately one third of home purchases are now being made by people who have ready cash to pay for a house. Such people include: foreign buyers, affluent residents and investors.
To increase the likelihood of being approved for a mortgage, it is wise for a potential home-owner to: improve their credit score, avoid signing up to any new credit cards, save so that a deposit is available, reduce debt and allow more time than they expect to need before trying to purchase.