Consumers must gauge their buying power before making a move on a home mortgage
With lenders struggling, borrowers defaulting and credit tightening, qualifying for a mortgage is becoming increasingly difficult. Even people who may have good credit are having a difficult time landing a mortgage because the lenders are becoming more conservative.
Like they used to be.
When Al Thorup first started originating mortgage loans 25 years ago, it took a solid credit score, a down payment and some extra cash in the bank to qualify for a loan.
“Those guidelines were based upon years of experience and knowledge throughout the history of the business,” said Thorup, now executive director of Indiana Mortgage Bankers Association, an Indianapolis-based trade association in the real estate finance industry. “And they made sense.”
Then it got easier. Too easy.
“For the last several years, the lenders have been so loose with their money that if you had a pulse and could fog up the mirror, you were pre- qualified,” said Bryan Traylor, a mortgage loan officer for Fifth Third Bank. “This has really come back to bite us.”
Tanikia Meeks, a Realtor for DW Real Estate Group on the Northwestside, says business has slipped, but “people are still buying.”
“Financially, you have to be prepared more now than ever before,” she said. “You’re going to have to have money to get a home.”
The squeeze is not limited to lower income brackets, according to Dick Richwine, Indiana’s top-selling agent for Century 21 Realtors for eight of the last 10 years. He recently had a deal on a $510,000 home “with people fighting to buy it” fall through because of mortgage issues.