Back to the Future, or, What Marathon Running and Mortgage Loans Have In Common

October 14, 2009 · Posted in News For Homebuyers

So this guy comes into my office. He sits down, we have a chat, and at one point he says, “I think I’d like to run a 10k.”

“You ever done any running?” I ask.

“Nope. Not really. Truth is I get winded climbing the stairs.”

“I don’t think you’re going to be able to run a 10k,” I tell him.

“Oh. Well, I guess I’ll come back in a few months and see if I can do it then.”

“You going to train, or anything?”

“Nah. Time takes care of everything, right?” he says

Okay, this didn’t happen, at least, it didn’t happen exactly like this. But I have people come see me all the time that would like to buy a house, only for one reason or another, they can’t qualify right now. They have a ding on their credit, or they don’t have a down payment saved up, or their income is spotty. Something.

We don’t beat around the bush with people. We tell them the straight dope – if they don’t qualify, then they don’t qualify. But the reaction to this news usually is something like what the guy said above, something like, “I guess we’ll try again later.”

Time was, nobody qualified for a home without serious preparation. It takes time to save enough money to make the down on a house. Credit fixes don’t happen overnight, no matter what the radio ads say. And establishing a good work history takes two years at a minimum. This was the way things were for generations. If you wanted a home loan, you needed 20% down, excellent credit and a solid work history.

Fast forward to the late 1990s. Congress decides that everyone should have a piece of the American Dream, and the standards start to relax. By 2006, if you had a pulse, you had a loan. It’s as if, to stick with the analogy above, everyone was entering marathons whether they had trained or not.

You know the rest. It turns out that the average Joe can’t run 26.2 miles. The world we live in now is much more like things have been for most of history. We’re back to the circumstances that used to exist – if you want a home, you’re going to have to work at it, just like if you want to run from Marathon to Athens, you have to train.

It’s far from the end of the world. All it takes is a bit of planning and some guidance. This part is actually fairly critical. It is certainly possible to get yourself in mortgage-shape without help, but it’s always going to go faster and be less stressful if someone helps you put a plan together. Rates are headed higher, home prices are rising, every month’s delay in getting in financial shape could cost you thousands. So why do it? The help is free.

Call your friendly neighborhood mortgage professional and ask for a checkup. If he’s not happy to speak with you and help you, call me and I’ll do it.