Many real estate buyers have experienced great difficulty in completing their home purchase over the last few years, due to a lender side issue other than the normal credit and job confirmation issues. I have seen many potential home buyers with credit scores over 700, and a steady employment history, get turned down for financing altogether. We can trace all of these problems back to banks and their hesitancy to loan based on current market conditions.
Their Logic
Loaning money in a slow market is not as easy as loaning it in a busy market, so wait until it is busier to loan? The idea here is this, the banks are making borrowing money difficult because they have essentially free money from the government with rates for banks at.5%, then they turn around and loan it at “historic lows” for about a 4-5% per year pure profit. They are taking taxpayer dollars for free, turning around and loaning them for 4-5 points per year back to the same taxpayers they initially got the money from.
The real estate market crash could not have been better engineered as the banks are collecting REO property and property, they are also planning on how to get all that housing product back onto the shelf for the 88 million new home buyers starting to hit the market. Many changes have had to be made to the laws to allow the banks to most aggressively take advantage of the real estate industry, and that takes time.
The Best Way To Resolve This
Home owners were originally the lenders, before the era of the big banks and banking corporations. When a buyer did not have the cash to pay off a house, the seller simply held the deed and charged and collected interest until the note was paid in full. Acquiring your real estate in this way is the smartest way to buy your property today.
Let us just say you have to purchase a lot and save up the rest of the money to build it, you are way ahead of the game than if you would have borrowed through a bank. With all of the fees and interest banks charge you, plus the insurance that covers their butts that they make you pay for, you are really the one taking the risk, not them.
The simple solution is for Americans to be patient and not purchase a home until they have at least 20% saved up, then buy land. Owning the land yourself will always make building your home much easier to finance. Getting back to a frugal mindset that values cash more than materialistic possessions will help you appreciate your money a lot more, and help you grow it more than anything.
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