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Mortgage Rates Low But Lending Still Tight

Great news for some. Mortgage rates fell this year.

Hmm... This would have been great news five years ago, when borrowing was easy. But does it really make a difference, in the big picture?

As reported by The Boston Globe, mortgage rates fell this week to the lowest level of the year. But Boston real estate attorneys aren't quick to jump on the celebration float. After all, lending is still tight.

The fall in mortgage rates came after investors moved money out of the European securities market and into U.S. markets.

But for potential homebuyers, many won't be able to benefit from the low interest rates.

After all, how can you benefit when you can't get a loan?

Back in the good ole days, Boston real estate lawyers remember something called "stated income." 

What does that mean?

Think of it as the honor system for a mortgage loan. When you get a mortgage loan, you need to qualify for it. The lender needs to be sure that you can pay the loan back. So, they look at your income level. The logical way to do this would be to ask for your income tax returns.

But did we actually expect that the housing market of the early 2000's was logical?

No, that would be ridiculous.  

Lenders used to ask you, back then, to state your income. All they would look at back then would be your credit history.

Then, the economy folded. As did the housing market. Or was it the other way around?

Now, in the absence of stated income loans, borrowers are feeling the pressure to document their income. They must provide the lender with pay stubs, income tax returns and whatever else would help substantiate their income. It's just not as easy anymore.

So much for the honor system.

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