December 14, 2022
Are you in the process of getting ready for a home loan? There are plenty of home loan industry trends to pay attention to when you are in the planning stages of buying a home with an FHA mortgage.
Among them are mortgage interest rates, home sale prices, and then there are the costs associated with the loan such as appraisals and title searches.
Many industry players observe these trends. One of them is the Consumer Financial Protection Bureau (CFPB), which examines a variety of issues related to buying and owning a home on behalf of consumers.
CFPB Reviews Mortgage Data In 2022
CFPB has published observations about the first and second quarters of 2022. Among those observations? The causes of home loan application denial during those periods. What were the findings?
Interest rates and rising costs have created more financial burdens for typical Americans, and those financial pressures have resulted in higher debt ratios among certain segments of the home-buying public.
CFPB reviewed mortgage loan data submitted by 55 financial institutions, and noted for some 45% of all applications rejected by lenders for Hispanic and Black applicants, elevated debt-to-income levels were the reason in Q1 and Q2 of 2022.
Some argue that certain segments of the population seem to be disproportionately affected by these factors. And it does seem that many find themselves at a disadvantage because of these factors.
Changing DTI
That said, consumers can and do take steps to change the issues that stand in the way of home ownership–it takes time and patience. It may be possible to change your debt ratio over time, and you can start working on your DTI before filling out home loan application forms.
To be sure, not everyone has the benefit of time when it comes to meeting immediate housing needs, but those who can take the time should definitely do so.
Work On Your Debt-To-Income Ratio
Do you need to work on your debt-to-income ratio or DTI? There are benchmarks the lender will use to decide whether you qualify for the home loan or not. These may vary from lender to lender as many financial institutions have different standards.
Your debt ratio is the equivalent of your monthly outgoing debt obligation subtracted from your monthly income. Some things are not included in your DTI, but most of your bills will be.
The maximum DTI you can have and still be approved for a mortgage loan may depend on the lender. In general? Try to keep your debt ratio below 43%. That means less than half your income is taken up by outgoing debt each month.
Start reducing the amount of debt you carry as early as possible and be sure to give yourself enough time. One thing to remember about lowering your debt ratio?
It’s not advisable to close a credit account after paying it off. It is better to reduce the amount you pay out each month, leave the accounts open. Why? The older your credit accounts, the better it is for your credit.
Learn About the Path to Homeownership
Take the guesswork out of buying and owning a home. Once you know where you want to go, we’ll get you there in 9 steps.
Step 1: How Much Can You Afford?
Step 2: Know Your Homebuyer Rights
Step 3: Basic Mortgage Terminology
Step 4: Shopping for a Mortgage
Step 5: Shopping for Your Home
Step 6: Making an Offer to the Seller
Step 7: Getting a Home Inspection
Step 8: Homeowner’s Insurance
Step 9: What to Expect at Closing
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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