Buyers with less than perfect credit and lower-paying jobs struggle to find homes and financing.
You may have been hearing lots of reports in the news about various factors that indicate a recovery or stabilization in the housing market. While it is true that home prices are recovering, overall neither the housing market nor the mortgage market is normal. Mostly well-heeled borrowers with strong credit and income are taking advantage of today’s housing market. Those with less than perfect credit and lower-paying jobs are struggling to find housing. These buyers are continuing to rent and rents have been on the rise so the first time buyers and credit challenged buyers are struggling to save the money necessary to make a home purchase and repair their credit. New housing starts for the lower income folks are mostly nonexistent.
Key Facts
Here are a few salient points about the housing market and mortgage market brought up in a recent article by Realtor.com’s chief economist.
- Affordable homes aimed at first-time buyers are not getting built the only housing sector consistently posting gains in new construction starts is multifamily.
- Most distressed properties have already been bought up and turned into rentals by hedge funds at the end of Q2 2014 America had the highest level of renter-occupied housing ever.
- Despite low rates, mortgage applications have dipped to the lowest level in 14 years banks are reluctant to extend financing unless buyers have good credit, solid incomes, and big down payments in hand.
My Own Experience
Recently, I had an experience that highlights the difficulties facing buyers with less than perfect credit in the current mortgage market. I had a sale fall through with a buyer that I represented where their credit score fell just below 620 (for one of the buyers). This caused closing costs to rise by $10,000 or so and the rate offered jumped from 4.25% to 4.75%. The seller and buyer’s lender offered to cover the $10,000 jump in costs, but the buyer felt uncomfortable about the rate increase and opted out of the home sale. The buyer will continue to rent and revisit a purchase after their credit score recovers. The seller was willing to cover the buyer’s closing cost because they see the market starting to settle and did not have a replacement buyer. The seller has recently reduced their asking price to stimulate a new offer. My buyer’s credit suffered from a simple late report on a Direct TV bill. Pay your bills on time even the little stuff!