Home Sales Complicated by Hard-to-get Loans

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The Real Estate Marketing Insider (REMI) reports on news in the Naperville Sun that even though home sales are surging, home loans are making the process more complicated.

The Real Estate Marketing Insider commented on news in the Naperville Sun that despite rising home sales numbers, home and mortgage loans are becoming difficult to procure and slowing growth of the industry. REMI believes this to be bad news for consumers, particularly since many may be repairing their credit scores from lost jobs or credit card debt incurred during the housing crisis.

Journalists at the Naperville Sun spoke with Tom Miers, manager of a local bank. Miers says that loan applications are rising in tandem with sales numbers, but says there are still problems with complications like a “highly regulated market” and refinancing of old loans. Miers added that as a consequence of its mismanagement during the 2008 crisis, banks, especially larger firms, are subject to extreme regulation and scrutiny by government officials. As a result, turnaround time for loans is longer, and because refinancing cases are lower priority, the wait time for a refinance has nearly doubled.

The biggest change from the old business ways, some professionals say, is the amount of documentation required. Where the industry used to offer “stated income” loans, where the applicant just verbally provided an income number, all applicants must now provide two years of tax returns to show what they’re making. While the increased use of electronic correspondence like email marketing real estate has minimized this new step’s effect on the timeframe of a loan, the increased documentation has other effects. Primarily, it has increased the difficulty of getting a mortgage for retired people, self-employed professionals, and others whose tax returns may not tell the whole story of their income.

Credit unions, which have been lauded recently as a more efficient, consumer-friendly alternative to big banks, are having their own difficulties and frustrations with new regulations. Among the problems are a new rise in credit score standards, so that a home loan may require a “score of 740 or higher,” according to Lisa Kleven, a VP at a Naperville credit union. This primarily affects individuals hoping to refinance, who may not see as positive a result in their new loan as they had hoped. Still, according to Kleven, credit unions have the upper hand. Some bigger banks, in response to record-low mortgage levels, have completely left the home equity market, meaning credit unions are closer to offering a unique service.

The Real Estate Marketing Insider offered its comments on news in the Naperville Sun that difficulties in procuring home and mortgage loans mean slower growth for the recovering housing industry. New regulations have increased the paperwork, scrutiny and minimum credit scores for lending, making it more difficult for many consumers to get home loans.

About the Real Estate Marketing Insider: REMI is an online publication, based in La Jolla, CA, that provides real estate professionals with marketing tips, industry news, and trend analysis.

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