Mortgage process turns off buyers

Hope remains for those disheartened by loan
application rejections due to bad credit or debt
Monday, January 19, 2004 | 12:00 a.m. CST; updated 5:01 a.m. CDT, Monday, July 21, 2008

It took John Connor more than a year to buy a house in Columbia. With an imperfect credit history, a limited amount of money and few affordable homes to choose from, Connor, an auto technician, wondered if he’d ever find a place to call home.

“There were some times of despair, where I was depressed,” Connor said. “You just feel: ‘Am I ever going to find a place?’ ”

At one point during his search, Connor found a home in an affordable part of the city and applied for a Federal Housing Administration mortgage loan. But the agency rejected the application because the home had a crack in the basement.

After months of frustration, Connor eventually landed a home with the help of a local mortgage consultant who walked him through the process of getting a loan.

Securing a loan is among the most daunting hurdles faced by prospective home buyers like John Connor.

Columbia’s most affordable neighborhoods generate half as many home loan applications per 1,000 occupied housing units as other areas of the city, according to a Missourian analysis of recent federal Home Mortgage Disclosure Act and U.S. Census data.

Moreover, those applications are rejected by lenders 30 percent more often than those in other areas, the Missourian found.

To identify Columbia’s most affordable areas, the Missourian used guidelines set by the U.S. Department of Housing and Urban Development, 2002 home sales data from the Boone County Assessor’s Office and income figures from Census 2000.

Five census tracts in the central northwest and central northeast areas of Columbia — north of Broadway and straddling both sides of Providence Road — contain most of the city’s affordable housing. Census tracts in areas with high proportions of undergraduate students were excluded from the analysis.

More than two-thirds of applications for homes in affordable areas are rejected for one of two primary reasons, the Missourian found. One in four applicants were rejected because of their credit histories. And for 42 percent of the rejected applicants, the loan would have put them too far into debt. (Story continues below graphic.)


Home loan applicants in other areas of the city were rejected less often, the Missourian analysis found. Lenders rejected 29 percent of those applications for excessive debt and 36 percent for poor credit history.

Local residential real estate experts say one problem faced by affordable housing customers is the mortgage loan process.

“For individuals that are in economically disadvantaged areas, the process of home ownership is often foreign to them,” said the Rev. William Young of EnterLight Ministries, a group that helps Missouri residents find affordable homes.

Some buyers do not know what it takes to qualify for a loan, or even that with some help they can qualify for a loan. That was the case for Connor.

“I was on the fringes,” he said. “I would never have expected to get a house.”

Some local lenders, who say homeownership benefits the entire community, are trying to attract more loan applicants and gain more approvals in affordable neighborhoods.

Most of the people shopping for affordable homes are first-time applicants, said Eric Barets, a branch operations manager at Countrywide Home Loan, 2101 W. Broadway.

Micki Marrero, a local loan consultant with Springfield Mortgage, said that if an applicant is turned down for a particular property, it doesn’t necessarily mean he or she can’t qualify for a loan. Many applicants don’t realize they can apply again if they get rejected.

“I’ve had a lot of comments like, ‘I’ll never be able to get a loan.’ But that’s not the case,” said Marrero, who eventually helped Connor secure a loan.

Area lenders say it’s important for applicants who are rejected to communicate with loan officers. A mortgage loan expert can help applicants resolve problems such as poor credit.

“Credit history is important. Everyone is checking that,” said Deborah Graves, vice president and mortgage loan managing officer of Boone County National Bank downtown.

Some lenders offer formal programs to help applicants improve their credit history and eliminate other obstacles that get in the way of obtaining a loan.

Countrywide has a home counseling center to help clients navigate the home loan application process, including deciding whether homeownership is right for them.

Boone County National Bank sponsors similar seminars at University Hospital and other locations in Columbia. The bank also tries to qualify more people by offering special loans tailored to customers’ needs. Some loans, for example, require no closing costs or down payments.

“The possibilities are endless for home buyers,” Graves said. Some loan consultants, like Marrero, help educate potential home buyers without charging extra fees. She has helped clients settle their debts by negotiating with creditors.

EnterLight Ministries helps prospective home buyers set up budgets and resolve debt. The organization also conducts monthly workshops on how to apply for a mortgage.

“Individuals who have low incomes automatically feel that they don’t qualify, and that’s not true,” Young said. “They may not be able to get the exact home they want, but they can still purchase a home depending on credit history and such.”

But even with assistance from loan counselors and mortgage seminars, people shopping for homes still might not be able to find one they can afford, lenders say.

“The sense we get is that there is a lack of choices for people out there looking in certain price ranges,” Barets said. “They are restricted to looking at an existing home. Very few new homes fit into those price ranges.”

Connor started out by looking for homes in the $40,000 to $60,000 range but failed to find something he’d be proud to show his adult daughter.

“There’s nothing worse than making a house payment on something you hate,” he said.

After working with Marrero, he realized he could afford more.

Mortgage interest rates dropped to their lowest level in decades last summer, which allowed potential home buyers like Connor to consider more expensive homes. And because the rates remain low, more people are looking for homes.

Connor received a loan in July that allowed him to purchase a home on a quiet street across from Bear Creek Park. Evergreen trees surround his back yard.

“I’m happy every day I come home,” he said.

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