Why you can't get a mortgage

Standards are higher this year than last. Lenders are requiring credit scores too high for nearly 80% of the population, as well as hefty down payments.

By Teresa at MSN Real Estate Oct 8, 2012 2:23PM

Keys to a new home on mortgage papers (© SuperStock)Nearly every time we get a new set of real-estate statistics from homebuilders or the real-estate industry, the news release includes a reminder that “tight credit” is holding back sales.


Just how tight is credit? According to syndicated columnist Kenneth Harney, not only is it harder to get a mortgage to buy a home or refinance than it was in 2006, but it’s also harder than it was last year.


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Only 20% of consumers have credit scores as high as the average score of borrowers whose loans were backed by Fannie Mae and Freddie Mac in August, Harney reports. That score was 763 for home purchasers, one point higher than last year, and 769 for refinancers, six points higher than August 2011. The average FICO (Fair Isaac) score on all loans closed in August was 750, nine points higher than last year.

Harney concludes: "To get a mortgage, you’ll generally need high scores, big down payments — except for FHA, which accepts 3.5 percent down — plenty of time and reams of documentation."

Among the other examples Harney quoted (using August 2012 figures for Fannie-Freddie loans) of today's "tight credit":

  • The average down payment for a home was 21%.
  • Those who refinanced had an average of 30% equity in their homes.
  • Homebuyers ended up with a debt-to-income ratio of only 33%, including the new mortgage.
  • The average time to process a new mortgage application was 49 days, nine days more than last year. Refinancing took an average of 51 days, 14 days more than last year.

By the way, this has nothing to do with the Qualified Residential Mortgage standards mentioned by GOP presidential candidate Mitt Romney in last week’s debate. Those standards not only are not yet in effect, but they also have not yet been determined.

One reason banks are demanding so much documentation is that they fear being forced to buy back mortgages that Fannie and Freddie said were inappropriately given in the past, according to an article in The Wall Street Journal.


One homeowner quoted by The WSJ had her home purchase closing delayed after her credit score fell 100 points over an unpaid $3 charge to Amazon – which she didn’t realize had ever been made.


Have lenders gone too far? Or is today’s current credit climate appropriate?

Tags: loans
Nov 17, 2012 9:21PM
Listen all of you downers we still live in a free country and if you are really bothered by all this nonsense then everyone need to stop all the crap and making excuses for everyone else, look we are not perfect and more then likely we never will be things are tough but we will persevere.  Obviously the majority spoke on election day and be thankful as people we are allowed to vote. Sometimes you win sometimes you lose but can't we a least be united and stop blaming all our over spending and gluttony on everyone else somehow it is always easier to shove the blame on the next guy. People need to take responsibility for for some of this I mean no one forced you to buy a house you couldn't afford and now the market dropped and your upside down really who's fault is that . Everybody wants to be living large till they can't any more then it's oh, he made me do it...
Nov 17, 2012 6:36PM
Anyone with a fiscal I.Q. of over three better figure out real quick that cash is king and will be for a very long time. Back to the barter system for the next ten years or so.
Nov 17, 2012 6:33PM

All of this is really simple to figure out with two word's, (CORRUPTION & GREED ) for the past 20 years on both sides. Buyer's and Lender's. We went through this in the 80's with the Lincoln Savings and Loan fiasco and they said it couldn't happen again and ( wham ) did it again on an even bigger scale and the idiots are heading down the same road to do it all over again even bigger. Only two weeks into the re-election and already the folks who voted in the Dems and Obama already have buyer's remorse.


Nov 17, 2012 5:19PM
I no longer believe in "loans". If you don't have the money to buy it you don't have the credit to own it. Plain and simple. However I wish I knew that before I got so far into debt that I had to file a chapter 7. I never thought it would happen to me. So it's cash from here on out.
To "fun size"-good luck on getting an actual loan for yourself.  We went through the same thing, and already paid the $300.00 for the appraisal, and the $500.00 earnest money.  We were also going to put 15% down and the deal fell through even after the owner accepted our offer.  Why, because the lender could not get it's act together.  Even though the lender is the one that backed out of this transaction, we still did not get the appraisal fee back. 
Nov 17, 2012 2:28PM
I am a buyer! I wold buy today if I could. I have over 750 credit and my fiancee has over 800 credit. I am self employed and she is part time and finishing her Masters degree. We both make more than enough to afford whatever we want. Banks wont even talk to us. I am currently in the middle of paying EXCESSIVE taxes for 2 years to be able to get a mortgage. I will pay approximately $25,000 more than necessary to be able to get a loan just because I am self employed. How is this fair. We have excellent credit and more than enough money and NO debt and yet, NO LOANS to be found!
Nov 17, 2012 1:54PM

This story is true, well at least some of it. To be honest you don't need a 700+ score and it doesn't have to be a perfect credit report as well. We got our approval letter in hand today and its at 3.5% interest fixed for 30yrs. We may or may not need a down payment and if we do its at 3.5%. Our FICO middle score is at 631 and trust me our credit  report is far from perfect. Yes we have collections and charge-offs, but with the right lender, they can show you how to boost your scores as we did ours in about 1.5 months by 70 points. I am not near perfect but it starts with a lender who can show you how to do it. We  only had to pay down on our credit cards to $10 a piece which wasn't hard. That is how we did it. Let me say that I am thankful for USDA loans because that is who we got our loan through, although there is income limits it was right for us. If you know what programs are available the path to home ownership is not that difficult. Now comes the paperwork part which is going to be a lot, but I will get it all together.

Nov 17, 2012 9:34AM
Were damned if we do and were damned if we don't this mess was created by our own government and now they want to place the blame on the people who work and keep this country growing without jobs people cant pay for their homes Bush started this recession and Obama made it worse why do we vote for one man and give him total power to make decisions or all of us and how to spend our tax money really makes no sense wee need to change our government and w should be able to know how every h penny is spent and who we support or help and what companies we allow to sell their products here to much power in one mans hands is total suicide for the rest of us sometimes we cant even trust our own family members why should we trust this man with our future and our children's future Obamas kids are living the life best schools best clothes living in luxury while we cant even keep our homes.
Nov 17, 2012 8:10AM
well its not gona get better under obama its only gonna get worse hes an idiot who has a proven record he has no clue what to do   lookin stupid is all he can do hes a community organizer and a crooked lawyer
Nov 17, 2012 5:30AM
Yes the same people that put us into this mess are the same ones making up the rules to prevent us form working our way out of the debt crisis
Nov 17, 2012 2:30AM

yes the have gone too far. I recently got tured dwn for a VA refinance on my house. Their reason was I did not have 5000.00 in my savings account to cover closing costs. It was a VA Refiance. The costs were rolled ino the loan. There was no out of pocket cost associated oher than appraisel fees.


Nov 17, 2012 12:28AM
The standards were way too lax before.  Now they are too stringent.  You have to pay the piper, as they say, and he has come calling for his check.  People buying houses are paying cash, and hav been for a while.  It is actually the best time in a long time to buy, if you write a check.
Oct 20, 2012 9:48AM
I think that the banks were giving loans to people who wouldn't pay them not that they couldn't.  I'm 44 and have been poor all my life....so having good credit is not possible for me.....can't qualify for any kind of loan anywhere; so I have no revolving accounts.  Since I can't establish credit and have insufficient income where does that leave someone like me?-----in the dirt.   I think that banks should start offering loans to people on fixed incomes for homes that have been abandoned  or foreclosed.  I am responsible and I pay my bills, and I don't live beyond my means, shouldn't that count for something?

Most of you do not know what you are talking about.  My husband and I recently purchased a new home in Florida. The majority of the hurdles that the financing institution put us through were unnecessary.


Facts: My credit score is 820. My husband's credit score is 790. I have over $100,000 in my bank account (which, by choice, was also our financing institution). We have over $500,000 dollars in stocks, bonds, and other assets. We both have IRA's, with substantial balances.  We are both employed (with high incomes) on a full-time basis.  We have no credit card debt. Cars are fully paid for. 


All supporting documentation was timely provided to the financing institution, along with income tax returns and all other requested paperwork.


We recently sold our home for $580,000.  We have never been late with a mortgage payment or any other bills.  We have never declared bankruptcy. There are no liens or judgments against us.  There are no pending lawsuits. Our children are all college graduates who no longer live with us or are dependent on us.


We could easily have paid cash for the $300,000 house that we purchased.

Yet, we chose to obtain a mortgage because of the low interest rate.


The bank held up our financing because it insisted on being provided with a copy of my husband's "Separation Agreement" which made reference to "child support." The loan officer advised that this had to do with my husband's financial obligations.  Although I explained that the Separation Agreement was over 10 years old (2001) and that the subject "child" is currently 25 years old and is no longer even eligible for "child support", she insisted that the bank had to have a copy of this document. The bank finally relented when I told them we would take our business elsewhere.  


So, in essence, there are a bunch of nitwits out there who are writing mortgages.  

Oct 11, 2012 7:20AM
Look at the bright side, foreclosures are down. There is rarely just one reason for anything to happen, but there is always cause and effect.
Oct 11, 2012 7:14AM

Hey to all of you “BLAME IT ON BUSH & the Republican” FOLKS OUT THERE…THE US Housing Crisis was at the epicenter of this country’s economic collapse as well as economic chaos world-wide. Now what was the root cause of this economic chaos you ask?


Consider this:


·         Jimmy Carter pushed for and signed into law the Community Reinvestment Act which forced banks to lower their standards so that previously unqualified people could get a mortgage.


·         Bill Clinton then doubled-down on the Community Reinvestment Act and greatly lowered mortgage standards to allow a lot more unqualified borrowers to get loans.


·         Bill Clinton’s Attorney General, Janet Reno, then intimidated banks with threats of legal action if they did not give loans to unqualified borrowers who would not have the income to pay the loans back.


·         A member of the Clinton administration, Franklin Raines was then put in charge of Fannie Mae by Bill Clinton. Fannie Mae bought up a majority of the bad loans made by banks to unqualified borrowers. Raines then falsified Fannie Mae financial reports so he could collect bonuses which totaled over $90 million for 5 years.


·         Senator Chris Dodd, head of the Senatorial Financial Committee, suppressed efforts by President George W. Bush and congressional Republicans to rein in the corruption at Fannie Mae and Freddie Mac. He got a very favorable loan by a bank associated with Fannie Mae and Freddie Mac. He got large political campaign contributions from Fannie Mae and Freddie Mac.


·         Barney Frank, head of the House of Representatives Banking Committee, also suppressed efforts by President George W. Bush and Congressional Republicans to investigate corruption at Fannie Mae and Freddie Mac.


·         Barack Obama, while he was an attorney, filed lawsuits against banks on behalf of ACORN in order to force banks to give loans to people who could not afford to pay them back. Obama, while he was a U.S. Senator, also suppressed efforts by President George W. Bush and Republican Congressmen to investigate and rein in Fannie Mae and Freddie Mac.

Oct 11, 2012 7:06AM
The good news is: bus fair is free today!  The bad news is: the busses aren't running!
Oct 11, 2012 7:05AM
If you are self employed forget it! In the current mortgage market no matter how much you put down you still have to qualify for the balance. The current situaton is a farce. Save the banks and they don't want to even refinance people that have been in their homes for years.
Oct 11, 2012 6:58AM

One of the biggest problems is strict underwriting.  Example: I need to refi a condo I purchasd 1 year ago

on a 2 year balloon payment from the developer. He still owns 12 units (all rented) in a 53 unit development and because underwriting won't approve loans where a single enity owns more than 10% of the units I am having difficuty with financing.  I do have the option of a loan with my credit union but they only make ARM loans and with interest rates so low on 30 year fixed I sure don't want an ARM.  We also

own a rural propery with acerage with 3 homes I need to refinance.  Because there are 3 homes there are no comparable sales for a fee apprasial and that translates to no loan.  The property cannot be divided.

This is making my gray hair turn white.


Oct 11, 2012 6:56AM
I am a licensed mortgage lender and I can assure those of you who bothered to read this article that the credit scores necessary to purchase a home are nowhere near those quoted above. There are many different types of loans available, with a VA loan starting at a 620 mid score, an FHA loan starting at 640, etc. With people writing this type of nonsence it only confuses those who wish to purchase or refinance a home into being too scared to even apply! Please, talk to a reputable licensed lender and see for yourselves! This nonsence only helps to hurt our economy. Interest rates have never been lower, either!
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