• Mortgage standards and the housing market

    Suzy Khimm asks whether credit worthy Americans are having trouble getting a mortgage? A bit of a personal follow up to this long term care story, with some comments about the housing and mortgage markets in Durham, N.C.

    • Next week we are closing on and moving into a house that can accommodate my family (wife and 3 kids) and mother-in-law. We had some very specific criteria in terms of layout (needed mother in law suite/apartment) and no flexibility in terms of school district.
    • We identified 5 houses that fit our criteria; all of them were empty* and one was in foreclosure. I priced having a comparable new home built and it would have cost ~30-40% more than what we ended up paying for a ~ 10 year old house. Interestingly, the contractor that I talked with about building me a house told me he got his first straight custom build contract in 2 years last week (though he has had major amounts of renovation work the past 9 months).
    • We had a very good credit score, and were able to pick among multiple 30 year fixed mortgage rate loans of between 3.5-3.875% (with differing closing costs, points). My first mortgage in the 1990s was 8% fixed.
    • The degree of documentation required to track the liquidation of money from a brokerage account into a savings to close the sale was much more involved than either of the two times I have gotten a mortgage in the past. I would say that it has been around 10 times as hard to comply with the information required (documentation, how specific it had to be formatted) to get a mortgage this time as compared to 6 years ago when we last got one.

    It may have been too easy before, maybe it is too hard now. The Goldilocks principle (“juuussst riiiiight”) is hard to achieve.

    DT

    *This rate is high above the national 14% of home unoccupied and high above the local rate. Not sure why all the ones we considered were unoccupied.

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