It’s getting harder for many to borrow money to buy a home

Bob Tedeschi writes in the New York Times of the effect of falling pay on mortgage applications and approvals.


He writes,

“LENDERS scrutinize all elements of a mortgage application, but one factor remains critical: the debt-to-income ratio, or the percentage of a borrower’s monthly gross income that goes toward housing expenses. If it surpasses 36 percent, lenders will typically reject the loan.”

Falling income makes it difficult to qualify for the lowest cost loan.

“The higher debt-to-income ratios are a function of the diminished income levels of many homeowners since the economic downturn, said Nicolas P. Retsinas, a senior lecturer in real estate at Harvard Business School and one of the authors of the report.”

“In some ways it’s counterintuitive to the big headlines about falling home prices and increased vacancies,” Mr. Retsinas said. “And while housing prices have moderated, they really haven’t tumbled enough to account for falling incomes.”

Just what the real estate market needs… more bad news.

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