I have been selling real estate since 1992. And in 2011, I have more customers that have chosen to rent rather than buy than I ever have. It seems that I get a customer every week wanting to rent a home rather than buy one. I have conversations with most of them and it usually goes like this;
- Myself- “So, why do you want to rent rather than buy?”
- Customer- “I can’t get financing.”
- Myself- “What is keeping the bank from loaning you a mortgage?”
- Customer- “My credit is shot from the backlash of this economy.”(or some variation of this scenario)
- Myself- “Do you have a job?”
- Customer- “ Of course.”
- Myself- “If your credit was better, would you be renting or buying?”
- Customer- “Definitely buying.”
The reason most people are having difficulty acquiring mortgages is because most banks have pulled the reigns in. The government has stepped in and made them do so, and for good reason. But, there are some banks that are pulling back even more than the government requires. Some banks have very strict lending requirements set down by the investors and underwriters calling the shots. It is understood, to a point. But there is a point that it becomes overly cautious. A bank that uses nothing but a strict formula of qualifications and doesn’t use common sense when choosing who gets a mortgage is missing out on business with strong buyers that might have been beat up by the economy and been bumped and bruised, but are still strong in spite of it all. These people have good jobs and are working hard to rebuild their credit. Banks pulling too tight on the reigns will reject these folks. What these folks need is a shot at redemption. But, instead they become tenants, not purchasers.
So, I ask you, what happens to the horse when you pull too hard on the reigns? He flips over and crashes to the ground. That is where a large portion the banking system finds itself. On a rearing horse ready to smash down onto the trail. How long will it be before these banks realize that by pulling back too hard, they are actually doing harm to themselves? How long will it be before lenders start evaluating the whole borrower’s situation and stop simply plugging their criteria into a formula? How long until they realize they are missing out on business from good buyers?
In the meantime, good buyers are kept on the sidelines. These good buyers are throwing money out the window and into the pockets of landlords. They sit and wait and feed their pent up demand for homes.
I actually know of a bank that has pulled the reigns a bit, but also still uses common sense when considering a new borrower. I happen to be married to a lender that works for just this type of entity. Frankly, it is the only reason that I am aware that this type of bank exists! Don’t rely on the media. Do your homework. Ask your coworkers, friends and family who they have banked with recently and had success. Word of mouth is still a great commodity. And, if you are one of the few that know of a bank that has treated you fairly, used common sense, and actually closed when they said they would, please spread the word! Let the world know that they exist.