Following the lending debacle in 2005-2006, getting a loan in 2007 was not the simple accomplishment it had been in previous years. Qualified home buyers, who would have easily obtained financing using what had previously been considered reasonable guidelines for loan qualification, are now finding it a lot tougher.
As reported by the Wall Street Journal, mortgage lenders denied nearly one-third of loan applications according to a report issued by the Federal Reserve. Minorities were most affected, with a decline in mortgage approvals for Hispanic buyers being down 49 percent, while those to African-Americans declining 35 percent between the first half of 2006 and the second half of 2007. Loans to white buyers also declined by 22 percent during this timeframe.
According to the Wall Street Journal article, the following were the most prominent reasons given for denial.
Credit History 30.25 percent
Not enough collateral 23.4 percent
Other 23.3 percent
Debt-to-income ratio 20.7 percent
Credit application incomplete 14.2 percent
Unverifiable information 8.4 percent
Insufficient cash 3.8 percent
Employment history 2.0 percent
Mortgage insurance denied 0.2 percent
Hopefully, if and when the current loan bail out, or a reasonable alternative is approved, we will get back to normal.