It has become a lot tougher for first-time homebuyers to secure a mortgage these days.
With the mortgage industry rocked by soaring delinquency and foreclosure rates, particularly in the subprime loans made to people with weaker credit, lenders have become much stricter about doling out the dough. They have tightened their credit standards, requiring higher down payments, better credit scores and more documentation on income and assets.
These higher hurdles hit first-time homebuyers particularly hard, experts say. The buyers often struggle to accumulate a down payment.
Early this year, "it was pretty easy to get almost anyone a mortgage," said Bethany Marten, a mortgage broker in Baldwin, N.Y. "In the past, really marginal buyers could get mortgages. But we have a lot of people we can't do loans for right now."
Now, a growing number of people are defaulting on those mortgages, particularly subprime loans made to people with blemished credit histories. As a result, lenders are pulling back on their offerings.
Federal and state regulators also are cracking down on lenders, saying they should take into account not only the borrowers' ability to handle the monthly payments during the teaser rate but also when that rate expires and the payments grow.
Lenders said this practice would cut many people out of the market.