Is It Hard To Get A Home Loan In Spokane, WA?

According to Realtor®Mag, the Mortgage Bankers Association estimates that about 30% of potential home buyers have their loan application turned down or just drop out of the process.  They cite tougher lending guidelines or “incomplete applications” as the cause.  Considering that an “incomplete application” has nothing to do with loan guidelines I have no idea why the MBA included that group within their statistics.

I’ve seen more and more headlines like this recently and I’m left wondering who is spinning this information to the media and why?  I figure when there’s this much buzz around a non-issue, some group has decided to make it one.

Let me preface my comments by saying I recognize being turned down for a home loan is a very emotional issue, and in some cases a financially burdensome issue (if you can’t refinance to a lower payment).  However, while I’m sure there is a small percentage of people who probably should qualify for a loan but can’t as a result of tougher lending guidelines, the majority of the time a borrower is declined it is for legitimate reasons.

There are really only four large segments of borrowers who can’t get a home loan right now:

1. People with less than 620 credit scores.  Even this isn’t entirely accurate as FHA will go below 600.  It’s hard to have a good credit history of paying bills on time and be under that mark. I’ve even seen credit reports in which the borrower had a short sale or a bankruptcy within the last two years and still have a 680 credit score.




2. Investors who have more than 10 financed homes, and they want to buy more.  No slight against investors but I’m not concerned. Fannie Mae, Freddie Mac, FHA, VA, and USDA are there to help families buy a home to live in.




3. Self-employed people who are no longer allowed to lie about their income.  I realize “lie” is a very strong word but that’s the best description as to how the Stated Income loans were used in the past.  I have plenty of self-employed customers who can provide tax returns that demonstrate they make sufficient income.  On the other side, I frequently hear “Mike, you know how it is to be self-employed. You don’t report all your income and you overstate your expenses.”  No, I don’t know how it is.  And you can’t lie to the IRS and then get mad because a lender won’t give you a loan.  In most tax returns I have reviewed resulting in a loan denial, the business really didn’t make enough money.  The owner often focuses on the cash coming in but they don’t acknowledge the impact of offsetting expenses that reduce the take home pay.  I’ve never had a problem claiming all my expenses to run my business and still show a healthy profit – nor have dozens of self-employed people we’ve helped get approved.




4. Borrowers with absolutely no money in the bank.  In the mid 2000’s a borrower could easily move into a home with nothing out of pocket.  100% financing was widely available.  Today, there are still zero down loans available if you qualify for a VA, USDA, or WA State Bond program.  Even if you can’t fit into one of those programs, you only need 3.5% down for an FHA loan.  That is not a lot of money, and I’d argue if you can’t come up with at least $5,000 maybe you aren’t ready to purchase a home.
   

So, are 30% of home loan applicants being turned down?  I’m not seeing those kinds of numbers, but I’ll finish with a message to all those banks that are turning down 30% of their applications – please send them my way!  I’m sure we can turn at least some of those into approved loans.

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