An approved mortgage application is one of the important things you'll need before you can get your dream home. Current mortgage interest rates are at near historic lows and while this might seem beneficial to buyers, lenders are already imposing strict regulations, which limits the number of applications approved.
According to Realtor.com, the number of new mortgages in 2015 was only 6.2 million. This was higher by half a million than the mortgages approved in 2010 during the height of the financial crisis but lower than the 8.1 million approved applications in 2007.
"It is, quite simply, too difficult to get a mortgage today. And that is limiting the pool of potential buyers," said the publication's chief economist, Jonathan Smoke.
Lenders are now becoming even stricter with their standards in approving mortgage applications. For instance, one's credit should be as high as 754 as this was the median FICO credit score of successful mortgage applicants in 2015. This is higher by nine points as compared to the previous year.
Aside from this, mortgage interest rates continue to hit an all-time low, with last week's rates at 3.8 percent, which limits the profits for the lender.
"The lenders' costs have gone up, and their ability to make money continues to be limited by low-interest rates," Smoke added.
The government has also imposed more rules and regulations for the lenders to ensure that the economy will not crash because of faulty mortgages. Lenders can be charged for even the smallest of mistakes, which further explains why lenders are becoming stricter with their approval.
As previously reported on Realty Today, it would, therefore, be advisable to get pre-approved and get your credit score as high as you can before applying for a mortgage.
Paying your bills on time would help increase your credit score. You should also exercise caution when applying for more than one pre-approval because this will also take your score down every time your credit is pulled out.
