There are many new regulations that are making it a little bit more difficult to buy a home. While the subprime mortgage crisis is history for most Americans, federal regulators have implemented new rules to avoid this housing meltdown again. The economy and the housing market have both stabilized in most markets across the country you regulations still are very strict.
In looking at different related data when it comes to housing and the mortgage industry. A new article by 24/7 Wall Street talked about 10 different ways in which buying a house in America is more difficult than it was before the crisis. This is not to get you frustrated or discouraged but it is important to understand the obstacles you may face when buying a home.
It cost a little bit more to originate alone than before. This is due to regulations that there are more administrative services, paperwork, and time involved. This is also turned into longer waiting times for borrowers.
#1. Higher processing costs.
This is the cost for the loan origination. This is the process from application to the disbursement of money. Loan originations rose up to nearly $8900 in the first 1:45 thousand 17. In 2008, that number was about $6000.
#2. More paperwork.
Because of the Dodd-Frank act, more lenders must provide even more documents along with the loan application. Not only must borrowers submit their current employment status and debt levels but the letters must disclose all the costs involved in each loan and this just adds more to the paperwork.
#3. Longer wait times.
It takes longer for lenders to process these loans today because of tighter regulations and stricter rules. Just a few years ago most underwriters could process about 165 loans per month but now, that number drops to just 33.
#4. Property inventory is getting scarcer.
Housing inventory across the nation is tougher to come by in general. In 2011 most properties were on the market for an average of 97 days but this year, the average days on the market was just under 30.
#5. Less affordable homes.
Home affordability index was 100 in the third 1:45 thousand 17, the lowest it's been since 2008 when the index was 86 and we were in the middle of the housing crisis. Homes continue to go up and the index has reached up to 154 with home prices across the nation rising over 73% while average weekly wages have only increased 13%.
#6. Fewer loan options.
Interest rates are still low bad loan programs and the different options are getting harder to come by. The higher processing costs and fewer creditworthy borrowers. That combination is just hard to match up a loan to a borrower.
#7. The requirement for a higher credit score.
Lenders are just getting tighter in all aspects including the requirement for higher credit scores. After the subprime housing crisis, banks were hesitant to lend money to anyone with a FICA score below 700. Lenders have relax those scores to some degree but it's still pretty high.
#8. Tougher lending rules.
Interest only loans, reverse mortgages, second loans and USDA zero down home loans are getting harder to come by because the rules are getting stricter. Yes, it's a good idea to safeguard borrowers and banks, but this has come at the cost of fewer borrowers.
#9. Fewer loan products.
This is also a good thing but it can have a negative impact because there are just fewer loan options and programs out there. In 2004 and 2005 there were hundreds of different loan options, many of which were a negative program for most borrowers but because we've cut so far back on the programs, there's just not an option for every type of borrower out there.
#10. Tougher down payment rules.
Low down payment programs come with higher fees and costs. Those with scores in the upper 600s with low down payment programs can expect to pay a lot more in fees, interest rates, and mortgage insurance. If your FICA score is more than 700, you might be able to get a discount even if you make a smaller down payment.
We are kind of going back to the old adage that you have to have almost perfect credit and a lot of money for a down payment in order to buy a house. Granted, this ups the chances of keeping the home without a default in the future but it does make homeownership a little more impossible for general Americans.