In a Strong Mortgage Market, Millions Can't Get Housing Loans
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Here's your money briefing for Friday, April 2nd. I'm J.R. Whelan for The Wall Street Journal. For mortgage lenders in the current hot housing market, these are the best of times. But for millions of prospective homeowners, these are the worst of times. Personal finances that might have qualified them for a mortgage in years past now leave them on the outside looking in.
We're really at extremes now with prices, with low inventory, just with the cutthroat competition that's out there to get almost every kind of home.
Coming up, our reporter Orla McCaffrey will explain why so many people can't get a housing loan and what the picture looks like moving forward. That's after the break.
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2021 is expected to be one of the best years on record for the mortgage industry.
Why are mortgage lenders writing record volumes while many buyers are denied loans?
And yet millions of Americans with good credit can't get a loan to help them claim their slice of the American dream. Orla McCaffrey covers consumer finance and banking for The Wall Street Journal. She's been digging into the numbers to find out why so many are being locked out. And she joins me now. Orla, thanks for being here.
Sure.
So Orla, we've been reporting on a number of trends that are making things harder for potential homebuyers, like low inventory and rising prices. And the Mortgage Bankers Association says that lenders' willingness to make mortgages is near its lowest level since 2014. A big part of that is tighter lending requirements. When do the rules and qualifications around getting a mortgage become so tight?
So they have been pretty strict all throughout the post-financial crisis era, but they have fallen even further since the pandemic started because when the economy was really uncertain and nobody knew what the extent of job losses would be, lenders became concerned that if they gave a mortgage to a certain borrower, that borrower within a week or a month could be out of work because of the pandemic.
And how much has the record low supply of homes nationwide contributed to this?
So the record low inventory is what's driving really a lot of dynamics in the housing market right now. So there are just under two months of homes available to purchase on the market, which is itself a record low. And when supply is so tight, it drives prices higher than people think homes are worth or higher than they were expecting to pay for homes. And if I'm a borrower requesting $300,000 for a mortgage, Maybe with my credit score and my credit history, I would be approved for that amount. But now if the house I'm looking at has increased in price over the last year or two, $350,000, maybe because lending standards are tighter and because prices are higher, I don't qualify for that higher loan amount that I would need to get the house.
Okay, so what are lenders looking for when they decide whether to grant a mortgage?
By far, the most important thing is a borrower's employment history. Typically, they like to see that you've had steady employment for at least two years.
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