Think you know when the first mortgage was issued? I’ll give you three chances. Ready? Set? Go!
Okay, how many of you guessed a really, really, long time ago? Like, ancient times? If you did, you were right. Historians believe that the history of mortgages and borrowing goes back to ancient civilization. Civilizations, rather. We see evidence of mortgage type agreements in ancient India, Rome, and even in Judaic law written in the Bible. But what’s the history of modern mortgages, you ask? The story, it turns out, is rather interesting. Read on to see the ups and downs of recent montage history and what this means for you.
The FHA
One of the things that makes the United States unique is the presence of a robust middle class—that is true historically as well as today. And most middle class citizens don’t have enough money up front to purchase something as pricey as a home. Thus enters the mortgage.
Before the great depression, homeowners would renegotiate their interest rate on a yearly basis. It wasn’t until the great depression, and government intervention, that the modern mortgage arose.
In 1934 the Federal Housing Administration (FHA) was created. In order to try to help the population and jump start the economy, the FHA helped those who wouldn’t normally qualify for a mortgage attain one. The FHA lowered down payment requirements, and set more oversight over the loan process (vetting candidates based on their ability to pay rather than if they knew the loan officer, and assessing the quality of a home before the purchase took place). As time moved forward, more and more people were able to achieve their dream of homeownership.
The 1950s
After World War II, more and more families were moving to the suburbs and trying to attain their dream of purchasing the perfect home for their growing family. The United States experienced an economic surge and mortgages boomed as a result. There was also a sharp rise in mortgages during this time because the government provided very competitive rates for veterans through the Department of Veteran Affairs.
The Great Recession
Most recently, the subprime mortgage crisis followed the peak home prices in 2006. When the markets crashed in 2008, they were triggered by massive mortgage delinquencies and foreclosures as well as a drop in home prices overall. The mortgage crisis affected the market at large with business and production slowing. Luckily, since 2008 the markets have significantly improved, and home values have risen.
As we look at mortgages throughout history we see many players: lenders, buyers, the government, and world economies. The most important player in your mortgage history, however, is you. The dream of homeownership is a dream that has lasted for centuries and will continue to drive people to work hard to provide a safe, warm, and beautiful place to enjoy day after day, year after year, decade after decade.
Nice newsletter. Good article. Good information. Thank you. Carol
For conventional financing, borrowers with scores at 740 or anywhere above generally receive the same loan pricing (rate and cost). That being said, the better your credit the higher your chances of receiving loan approval with high debt to income (up to 50%) or high loan to value (up to 95%) which can be a major benefit when applying for a new loan. For Jumbo financing, borrowers with credit scores above 800 are generally rewarded with both better pricing and easier guidelines. There are no situations where better credit is a negative when obtaining new financing so we should all continue to strive to reach and then stay in the 800’s.
What are the advantages of a score over 800
Thank you Mike for this information. As a residential realtor the information that you provide is crucial to a successful transaction for my clients. You are indeed a pleasure to recommend to all of my clients. You are so professional, thorough, conscientious and pleasant to work with. !!
Hi Dane! Wanted to make sure I'm clear on this. Am I right in saying that on whichever remodel is done you still take a loss rather than an increase in value - the ROI will never exceed 100% of cost?