Want a Mortgage? Why It’s Tougher to Qualify Now & Why That’s a Good Thing

Old-world standards are back in vogue for mortgage lenders, as discussed in the 3/15/09 LA Times article, Lending standards are back, and borrowers should know them.

The days of exotic loans that made things like 0% down payment and easy no-doc qualifications are over. Home loan lenders are back to the grind –  looking at things like income, savings patterns, amount of down payment and income documentation — all of which makes it harder for many to qualify for home loans.

But, given the bloodbath that the mortgage crisis has caused over the last few years, can anyon really be surprised. However, what does this mean for the overall housing industry in the short term? Four things primarily:

The Foreclosure Crisis & Tougher Lending Standards: 4 Things It Means for the Housing Market & Home Buyers

Good Credit Rocks! If you have good credit, a stable job and some savings, you are in a better position than ever to capitalize on the mess that is the foreclosure crisis.

Houses Sit Longer: As it’s more difficult than ever to get a mortgage, this means — in the short term — that houses will sit on the market longer.

Housing Market Stabilization: Once we all get used to the “new” (old) mortgage standards, it will stabilize the housing market because it means only those who are truly qualified (eg, job stabilization, good credit, come with down payments, etc.) will be buying homes.

Lock Out Many Would-Be Homeowners: Unfortunately, what this also means is that many would-be homeowners may never own a home — or, it may take years as they clean up bad credit, save a down payment, establish a healthy savings pattern, stabilize their employment history, etc.

But really, is this a bad thing?

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