There are a couple of reasons why buyers are finding it tough to buy a home and one of those reasons is people can’t afford a down payment.

Real Estate Today’s Tom Kelly told Seattle’s Morning News that new rules in place are encouraging lenders to scrutinize more – not only the assets people have in the bank, but also their credit and employment.

“[The banks] need to know whether they’re going to be able to repay what they’re going to buy,” he says.

Kelly says that the FHA has stepped up in the last few years…to be a bigger player in the mortgage market.

“The pressure on the FHA insurance fund has been so great that the mortgage insurance that people need, if they’re putting less than 20 percent down, is more expensive and those loans are further scrutinized.”

Make sure you have the 20 percent down payment in your account before you apply for a mortgage, Kelly recommends. Also, make sure your credit history is flawless and you’re honest about your employment history.

Credit is king, according to Kelly, and the magic score is 620.

Dave Ross recalls an old rule of thumb that Kelly says still sort of applies today: Don’t spend more than two-and-a-half times more than your gross income. The lender will most likely go through a second phase of scrutiny if your debt to income ration is greater than 43 percent.

People aren’t necessarily trying to buy homes they can’t really afford, but Kelly says the banks aren’t budging on down payments.

Not only that, but there’s very little inventory across the Puget Sound. There are too few homes for sale in the region.

Kelly says it’s actually a seller’s market.
“The competition is great.”

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