Arizona banks tighten lending standards making it more difficult to get loans for homes, cars
PHOENIX (3TV/CBS 5) - The Phoenix area housing market has presented a number of challenges for people looking to buy a home. There are not a lot of listings, interest rates are up, and prices remain pretty high, but that’s not all.
Guardian Mortgage loan officer Dean Wegner said he’s starting to see more banks and credit unions tighten their lending standards, which means home buyers will have to provide more documentation to get their loans approved.
“You might see, instead of a program asking say 20% down, it might be 25% down,” said Wegner. “Adjustable rate mortgages are almost non existent right now because of what we are seeing in lending. You’ll see instead of 1 year tax returns, 2 year tax returns. Instead of 30 day scrutiny, you’ll see 60 day scrutiny. If you are starting a job they want first paycheck, where before, they would actually take an offer letter.”
According to Wegner, the tighter lending standards are directly related to the recent collapse of three U.S. banks and a steady rise in interest rates, which has financial institutions skittish about taking on risky loans.
The tighter bank standards make it more difficult to buy a house, purchase or lease a car, or make home improvements. It also makes it hard on businesses that could use some extra cash.
Todd Sanders is president of the Phoenix Chamber of Commerce. He is concerned that a tighter lending market will impact a business’s ability to grow. “They might want to add another vehicle to the fleet, or may want to add on to their physical space,” said Sanders. “They might want to buy new equipment, so those all areas they would want to have access to some sort of credit.” Sanders said Arizona’s economy is stronger than other states, so a speed bump with lending conditions shouldn’t have a significant impact as long as it doesn’t last long.
Wegner advises potential home buyers to shop around while looking for a loan. “You should still be able to get financing,” said Wegner. “Just always watch your credit more than ever. The higher the credit, the lower the interest rate.”
The Fed will release its monthly inflation report on May 10. Wegner said if inflation is up, interest rates could go up again. But if inflation is trending down, interest rates could also come down.
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