As nearly a third of all would-be homebuyers are denied financing, they are giving up on the conventional mortgage. According to the Federal Financial Institutions Examination Council (FFIEC), more than 2 million people (30 percent of buyers) were turned down for mortgages last year, leading them to drop out of the buying process. The Mortgage Bankers Association (MBA) blames “stringent lender requirements or incomplete applications” for most rejections, although the New York Times reports that “insufficient income, bad credit…and low appraisals” are also playing a role.
Additionally, many people have lost or changed jobs in the past two years, which creates problems when applying for a mortgage because they have gaps in their employment history. Erin Lantz, Zillow’s Mortgage Marketplace director, says “it’s common” to be denied a loan if you have a gap in employment history in the past two years. Also, FFIEC reports, nearly 12 percent of new mortgage applications are denied simply because the information provided is incomplete or deliberately misleading. An example would be if you rented out your house in order to make payments, but then attempted to refinance using an owner-occupied loan.
Do you think that lenders need to loosen up, or are they right to hold on to their money in today’s uncertain times?
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