Since the real estate bubble burst in 2008, it has been much more difficult to obtain a loan for the purchase of real estate. Prior to the bubble bursting almost anyone could get a loan regardless of credit rating, income, etc. This in large part is what lead to the rapid rise, and fall, of the real estate market. Some feel it was the government forcing the banks to lend money to any and everyone or else the federal government was going to cut off the banks federal funding. Others believe it was the fault of the lending institutions. You could argue both sides until the cows come home but the end result is the same; it is much more difficult to obtain a loan today than ever before. Or is it?
Who you are, where you are looking to purchase, and what type of real estate you are looking to purchase play a vital role in obtaining financing in today's market. Since the crash of '08 banks have significantly tightened their lending policies. It is our opinion they have tightened them too much leading to a stall in the sale of real estate. This is a complete 360 from just a few years ago. Prior to 2008 just about anyone that applied for a loan received one. Now you have a better chance of getting water from a rock than getting a loan, even if you have great credit scores, plenty of money saved, a good job and low expenses. However, this is if you are getting a loan from a traditional lending institution for a private party purchase; i.e. buying a home from another home owner. If you are purchasing the home that is a foreclosure and currently owned by Fannie Mae or Freddie Mac OR are obtaining a loan through one of these government lending institutions the criteria you have to go through for approval is much less severe than if you were going through a traditional bank, mortgage broker, etc.
What does this mean to you and I?
The government continues to make it easier to purchase the properties they own. Lower prices and ease of obtaining financing are just a few of the ways they are doing so. For example, if you have a 600 credit score and don't make over a certain amount of money (typically <$75,000/yr.) you can buy one of these Fannie Mae or Freddie Mac owned homes with less money down and less hassle. Yet if you make over the above stated amount and want to purchase a home from a private party homeowner Fannie and Freddie won't give you the time of day. From this perspective it appears the feds are setting us up for another financial disaster that is all tied into real estate. Lending to those that barely have the ability to pay vs lending to those that have more than the ability to pay is something that doesn't add up.
