Easy Money’s Impact

If you have been following the money trends in the real estate market, you know that the basic sentiment of most people is that mortgages are hard to get even though some personal lending standards have been lifted by lenders. Yes, standards for lending in general are somewhat eased since a year ago. Government-backed mortgage loan standards have also been eased according to the reporting of banks to the Fed. Yet, I hear from many people that their banks only want to lend to people with perfect credit and/or large down payments.

There are some confusing money lending standards as a result of the pandemic and what many banks expected to happen because of the pandemic. Recently, a few banks introduced credit cards that don’t require persons to have a credit score. However, those credit cards will most-likely impact a person’s ability to get a mortgage loan.

Credit cards and personal loans have become easier to obtain since almost a third of the banks across the United States have eased their underwriting standards for this kind of personal lending according to the Federal Reserve Bank.

This makes it confusing for many folks. Many people believe that when they become eligible for credit cards and personal loans that they have improved their credit. It’s kind of an opposite situation in that the banks are looking for more customers who want the ease of credit cards.

You see, banks last year expected to take huge losses through the pandemic on personal credit. The banks tightened up lending thinking they’d minimize their losses. However, the expanded unemployment benefits and stimulus checks that the government sent out helped many people to pay off credit card balances. The end result was that banks experienced a reduction in credit card and personal loan business. The demand dropped and a revenue source dried up for credit card companies.

The situation now is that there are many credit card opportunities at 0% interest and balance transfer offers. These opportunities are meant to attract new customers. It does not mean that it has also become easy to get a mortgage.

Getting a mortgage shouldn’t be as hard as many say, but I’ve met so many people who believe that if they qualify for a new credit card or personal loan, that they are also doing better at becoming eligible for a mortgage. It’s good to have the help of a professional who is following all of the ins and outs of something that makes such a big impact on the quality of our lives.

Years ago when the mortgage industry was processing a mortgage application, it was common for the applicant to be told not to use any credit cards while the application was being approved. Today, the mortgage process is more streamlined, yet it is still important to use your money in ways that help you to obtain the loans that are important. How you use your money is important in the mortgage approval process.

The bottom line is still the same that money is a tool to help people achieve a lifestyle that suits them. It’s important to keep a perspective on it and to have an advisor who can help you with the right information for you to make the best decisions. I caution people against making drastic changes to achieve building a down payment. We’ve all heard people say that they’ll just eat beans and rice for a year to save money. It’s important to weigh the pros and cons of money decisions. It helps to have an advisor.

As the forbearances end, there may be more homes coming available on the market. Being ready to buy this summer at the end of the forbearance period is a good goal. You can be in a better financial situation within 60 to 90 days, but maybe not if you open too much new credit.

Know your options. Know your lending opportunities. Know the resources within your community.

Be sure to work with a licensed advisor that you know serves our community and will be there for you for the duration. Call 360-607-9312 or email mpattullo@financeofamerica.com for help preparing your credit history to best evaluate your mortgage options. We are your local advisor.

We lend where we live,

Mike