1 in 4 Mortgage Applications Rejected
The tightening of credit by lenders across the country continues to keep more buyers out of securing a mortgage. Nearly a quarter of people who apply for a mortgage are rejected, according to the latest data from the Federal Reserve.
“Good borrowers with one or two blemishes on their credit are being denied credit,“ says Lawrence Yun, the chief economist for the National Association of REALTORS®.
Lenders now are requiring higher credit scores and down payments that have kept more home buyers out, experts say. For example, the median down payment to buy a home nowadays is about 15 percent; during the housing boom, it was nearly zero.
“We feel it really reduces the demand for houses,“ says Mike D’Alonzo, president of the National Association of Mortgage Brokers. “It’s an unbelievable buyer’s market, but there hasn’t been as much activity as you would expect because not as many people qualify for loans.“
Indeed, Anthony Sanders, director of Real Estate Entrepreneurship at George Mason University, estimates that the tighter credit standards has caused as many as 30 percent of would-be buyers–or even more–to sit on the sidelines.