In response to the COVID-19 pandemic, lenders have placed tougher restrictions on mortgage loan approval. As this global crisis continues to negatively impact our economy, lenders are looking to take on less risk – starting with mortgages.
Factors for Loan Approval
Mortgage loan approval is a multi-step process. The applicant first needs to assure the lender he or she is capable of making the monthly payments on time.
Mortgage lenders also take into account an applicant’s credit score, current employment status and salary, financial history and credit utilization to make decisions.
Impact of the Housing Crisis
The housing industry nearly collapsed in 2008, following years of loan approvals for financially unstable buyers. The fallout was one of the worst recessions in US history.
After the federal government stepped in to bail out major banks, future applicants soon faced a more careful assessment for approval to prevent further loan defaults.
Who Is Being Denied a Mortgage?
As our economy is threatened with another recession, banks and lenders are taking a closer look at applications. In many cases, candidates with risky credit profiles are not being approved.
With unemployment also on the rise, some lenders are finding it difficult to verify employment status or income. Many of these applications are also being denied for the higher degree of risk.
During this crisis, the number of homeowners looking to refinance an existing mortgage has increased. Banks and lenders are working with applicants who have a solid history of repayment, rather than taking on the risk of a new mortgage applicant. Given the current state of the US economy, precautions are being taken to avoid potential future losses.
If you’re planning to apply for a home loan, be prepared for a lengthier process and new approval requirements. To find your next home, work with By Carrier to explore custom communities designed for your lifestyle. Contact us to get started!