In today’s tough housing market, where mortgage rates are nearing 8% and home prices continue to rise, many potential homebuyers are finding it increasingly difficult to secure a mortgage. A recent report from the Consumer Financial Protection Bureau (CFPB) reveals that mortgage applications are being rejected at higher rates than in previous years, with a 9.1% denial rate for home purchase applications in 2022, up from 8.3% in 2021.
This situation is especially challenging for first-time homebuyers who lack the equity from a previous home to leverage in a new purchase. Tai Christensen, President of Arrive Home, highlights that these rising interest rates are making it harder for buyers to qualify for a mortgage. However, there are strategies that potential homebuyers can use to improve their chances of approval.
One effective approach is to explore Down Payment Assistance (DPA) programs. Christensen notes that DPA can be a powerful tool in today’s market, helping borrowers meet down payment requirements without depleting their savings. By lowering upfront costs and potentially covering closing expenses, DPA can make a significant difference in a borrower’s ability to close a successful transaction.
In addition to seeking DPA, it’s crucial for buyers to set realistic budgets and stay on top of their credit scores. Credit quality plays a major role in securing favorable mortgage terms. For example, a higher credit score could reduce the interest rate on a $300,000 loan by half a percentage point, saving the borrower about $100 per month over a 30-year mortgage. Simple steps like lowering credit card utilization or correcting errors on credit reports can help improve credit scores before applying for a mortgage.
Tools like affordability calculators can also help buyers assess different scenarios and determine the right home price range based on their income and available funds. Despite these strategies, the overall market remains challenging, and in many cases, renting may be a more cost-effective option in the short term.
Other potential avenues include reducing debt, increasing income, or exploring less common options like assuming the seller’s mortgage or seeking owner financing. While these options may not be suitable for everyone, they offer alternative paths to homeownership in a difficult market.
As the housing landscape continues to evolve, it’s essential for buyers to stay informed and explore all available options to improve their chances of securing a mortgage and achieving their dream of homeownership.
View original article here: https://www.gobankingrates.com/loans/mortgage/mortgage-applications-are-being-rejected-as-rates-reach-8-how-to-get-approved/