Leaders from the lending industry recently shared their perspectives on the current climate of home mortgages with members of the NAHREP (National Association of Hispanic Real Estate Professionals) Convention in October. While a number of significant barriers exist, every consumer presents a unique situation and it is imperative to work with a lender who will create a loan tailored to each client.
Interestingly, the number one barrier to homeownership for Hispanics isn’t related to money, but lack of appropriately priced inventory.
On a positive note, investors are not as active in this price point any more, which means there will be more choices in coming months. But in another aspect of supply, the majority of new home builders are not adding homes in a first time homebuyer price range, mostly because the profit margin is not high enough.
Everyone agreed that encouraging move-up buyers is key to freeing up first-time homebuyer inventory and that education is an important part of that process. Many homeowners may believe they are still underwater, but a current CMA could help dispel those myths, particularly considering the YOY price increases we have seen in 2014.
According to the panel, the second greatest barrier is access to credit. Yes, access today is tight, but lenders reported that they are just as frustrated as consumers looking for a mortgage.
While everyone agreed that credit is tighter today than it was ten to 15 years ago, increased underwriting requirements stemming from government regulatory changes are causing the most consternation. This is particularly true among Hispanic consumers, many of whom have non-traditional credit panels which are not meeting these new underwriting standards.
The third major barrier to home-ownership for all consumers relates to some larger macro-economic issues with no easy answer in sight, issues which are affecting the ability to come up with a down payment. One of the reasons is high rents, which limit the amount of money that can be saved. In that same vein, skyrocketing student loan repayments are essentially mini-mortgages on a college education which negatively affect debt to income ratios. Many potential first-time homebuyers are simply not willing or able to take on additional debt in the form of a home mortgage.
Some creative solutions do exist in the form of low down-payments, down-payment assistance programs and HUD’s “Connect to Own” program.
Every client presents a different situation and in today’s complicated and highly regulated environment, it is crucial to work with a lender who takes the time to know everything thing about their clients to create the loan just right for them, building business around the environment we must operate in.
At the end of the day, getting people approved for mortgages is an imperative. Otherwise an entire generation of people will never be able to cross the finish line and become homeowners.
Photo: via FreeDigitalPhotos.net
