How the Mortgage Industry Has Changed Since the 2008 Financial Crisis
Before the mortgage bubble burst in 2008, there was a saying in the industry: “All you need to get a mortgage is a pulse.” Sounds suspect, no?
The mortgage industry pre-2008 was the wild west of the lending frontier. Credit scores and debt-to-income minimums might as well have been suggestions, rather than guidelines. Even worse, mortgage brokers opened offices across the country and provided mortgages to people who couldn’t complete their payments—and had no clue their interest rate could suddenly double overnight.
Supplying unqualified borrowers with mortgages they couldn’t afford ultimately came to a head and tanked the American economy for years. This may sound far-fetched, but it is not. This occurred less than 10 years ago, and the general public tends to have a short memory. If you are a first time homebuyer, this may have passed you by because you were renting, leasing, or living in a dorm.
The US government created new mortgage industry guidelines and regulations
In an attempt to stabilize the economy and restore faith in the mortgage industry and lending institutions, the government instituted regulations. Lots of them. These regulations have transformed the mortgage industry into what it is today.
Part of the regulations required Loan Originators to attend a 20-hour mortgage education course (plus additional hours in select states) and pass a test covering compliant and ethical mortgage lending.
Additionally, Loan Originators must take a minimum of eight hours of continuing education courses to keep current with any changes in the laws and guidelines. This results in better Loan Originators for you. Your Loan Originator is to be a trusted advisor, not an opportunist.
Obtaining a mortgage post-2008 has more requirements
Consumers today are required to have minimum credit scores, provide their employment history, and have acceptable debt-to-income ratios to qualify for most home loans. However, loans do exist if you have no credit score as long you meet other requirements and have a history of payments of rent, insurance, bills etc.
Above all, potential homeowners are held to a higher standard that did not exist pre-2008. Today’s housing market is largely made up of consumers with a good payment history with less chance of defaulting on their debts. As a result, mortgage industry regulators feel more comfortable offering home buyers relatively low interest rates, while higher risk consumers usually obtain loans with higher interest rates.
If you’re struggling with poor credit and want to improve it, please watch our video on effective and easy ways to boost your credit score. Most credit scores can be boosted in 30 to 60 days. In some cases, your loan originator can order a “rapid re-score” to improve your credit within 24 hours.
Are you ready to apply for a home loan? If the answer is yes, please contact me today!