It’s actually easier to get a home loan today
July 21, 2014
In previous columns, I've said that it's easier to get a home loan today than back in the Good 'Ol Days. Some readers find that hard to believe and have asked for some elucidation.
OK, here it is:
In the early 1960s, if you didn't have 20 or 30 percent of the sales price to put down, there were only two home loan options available, FHA and VA. If you weren't a veteran, there was only one.
There were no cash out refinances. If you had equity in your home, and wanted to convert it to liquidity, you got a second mortgage from a finance company, or an industrial bank, which was a finance company that took uninsured deposits. The rates were very high.
Debt to income qualifying ratios were much more stringent. The percentage of the monthly housing expense to total monthly income couldn't exceed 20 percent, and total debt, including housing expense, to monthly income had to be 25 percent or less. Today, the PITI (principal, interest, taxes and insurance) payment can be 28 percent of income while total debt to income, the so-called "back ratio," can be as high as 42 percent.
The wife's income could not be used to qualify for the loan, unless there was incontrovertible medical evidence that she could not bear children.
Single women could not qualify for a loan, unless they were professionals clearly beyond child-bearing age. Professional meant physician, attorney, college professor and the like.
It was difficult for a single man to qualify, but not nearly as hard as for a single female.
Unmarried couples could not buy a house together.
If a divorced woman was dependent in whole or in part on alimony or child support (and most were, because the pay scale for women was far below that for men) then the ex-husband had to go through the whole qualification process, including employment and deposit verifications.
It was strictly forbidden for a lender to divulge anything to the borrower on his credit report (reports were in the name of the husband, not the wife). Credit reports were never shown to borrowers, and they had very little recourse to correct errors.
Also, there were no consumer protection laws, including Truth in Lending, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, or Equal Credit Opportunity Act, just to name a few. At the loan closing a borrower who took everybody's valuable time to, say, read the Note, was viewed with suspicion by the closer. After all, if he intended to make payments on time, why would he have to read the note.
And all of these guidelines and rules applied to what were then thought of as more liberal parts of the country. You don't even want to know what went on in the old Confederacy.
Other than that, it was pretty easy to get a mortgage back in nineteen aught sixty three.
Pat Dalrymple is a western Colorado native and has spent almost 50 years in mortgage lending and banking in the Roaring Fork Valley. He'll be happy to answer your questions or hear your comments. His e-mail is firstname.lastname@example.org.