With a growing economy and lower interest rates, why do many Americans continue to face roadblocks, preventing them from achieving affordable housing? Millennials and middle-class buyers seeking affordable housing have found difficulty in finding vacant homes due to high demand in housing. According to the National Association of Realtors (NAR), the severe supply shortages in units for sale results in a typical home selling significantly faster than 2016. With low inventory of housing available, obtaining preapproval for a mortgage can be a competitive advantage for homebuyers looking to invest in a housing unit.
Housing Inventory Low
With an influx of buyers looking to buy a home, the housing shortage remains a huge obstacle in obtaining affordable housing. Additionally, this shortage makes the process difficult for buyers to take advantage of low-interest rates. Since the NAR started tracking inventory levels in 1999, housing inventory continues to steadily decline each year. In fact, the inventory reached its lowest point. With a low supply of housing, an affordable home faces competition amongst buyers, driving the home price out of financial reach. Furthermore, waiting longer to find a home also prevents buyers from building more equity and wealth.
Contributing factors to the low housing inventory include tighter regulations and an approved public sentiment against a new home building. Despite a lack of supply, most residents do not believe building more housing units will increase affordability. New development projects also fail to gain momentum due to neighborhood residents’ disapproval. Reports show that residents rally against construction because it will increase traffic, reduce parking space, and the neighborhood will lose its “character.” According to the President’s 2016 Economic Report, land restrictions cost the U.S. about $1.5 trillion in lost productivity.
Buyers Benefit From Mortgage Pre-approval
The increase in demand and low inventory to meet this demand means buyers must act quickly when searching for affordable housing. Getting mortgage preapproval can help potential buyers stand out from competition, and indicates to sellers that they are serious about making an offer and can match the asking price. Once selected, mortgage preapproval will make the closing process faster. Additionally, completed paperwork will help streamline the process. Mortgage pre-approvals typically last 30-60 days. Thus, if you’re looking to buy a home during the summer, be sure to jumpstart the process immediately.
How to Gain Pre-approval for a Mortgage
Lenders often check that borrowers meet certain requirements before granting preapproval. Paying off debt can boost a buyer’s credit score and prove a positive payment history to lenders. To reduce debt levels, buyers should handle delinquent accounts to improve credit scores. Afterward, buyers can focus on paying off debt with higher interest. Correcting credit score mistakes early in the home buying process can also help to reduce unforeseen obstacles during the loan approval process. It is also important to track and budget spending, as taking on more debt or opening new lines of credit can result in denial of mortgage preapproval. Additionally, lenders need these documents in the pre-approval process:
- Two Years of Federal Tax Returns
- Two Years of W2’s
- Thirty days of pay stubs
- Sixty days detailing all assets in all accounts
Contact the advisors at HUNT Mortgage Group for more information on how you can gain preapproval for a home mortgage.