Picture this nightmare: You apply for a mortgage, but your application gets rejected. Suddenly, you’re hit with an overwhelming wave of embarrassment, shock, and horror. It’s like having your credit card denied at the Shoprite. So. Much. Shame.

Sadly, this is a reality for some home buyers. According to a recent Federal Reserve study, one out of every eight home loan applications (12%) ends in a rejection.

There are a number of reasons mortgage applications get denied‚ and the saddest part is that many could have been avoided quite easily, had only the applicants known certain things were no-nos. So, before you’re the next home buyer who gets burned by sheer ignorance, scan this list, and make sure you aren’t making any of these five grave mistakes, which could land your mortgage application in the “no” pile.

1. You didn’t use credit cards enough

Some people think credit card debt is the kiss of death … but guess what? It’s also a way to establish a credit history that shows you’ve got a solid track record paying off past debts.

While a poor credit history riddled with late payments can certainly call your application into question, it’s just as bad, and perhaps worse, to have little or no credit history at all. Most lenders are reluctant to fork over money to individuals without substantial credit history. It’s as if you’re a ghost: Who’s to say you won’t disappear?

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According to a recent report by the Consumer Financial Protection Bureau, roughly 45 million Americans are characterized as “credit invisible”—which means they don’t have a credit report on file with the three major credit bureaus (Equifax, Experian, and TransUnion).

There’s a silver lining, though, for those who don’t have credit established. Some lenders will use alternative data, such as rent payments, cellphone bills, and school tuition, to assess your credit worthiness, says Staci Titsworth, a regional manager at PNC Mortgage in Pittsburgh.

2. You opened new credit cards recently

That Macy’s credit card you signed up for last month? Bad idea. New credit card applications can ding your credit score by up to five points, says Beverly Harzog, a consumer credit expert and author of “The Debt Escape Plan.”

That hit might seem minuscule, but if you’re on the cusp of qualifying for a mortgage, your new credit card could cause your loan application to be denied by a lender. So, the lesson is simple: Don’t open new credit cards right before you apply for a mortgage—and, even if your lender says things look good, don’t open any new cards or spend oodles of money (on, say, furniture) until after you’ve moved in. After all, lenders can yank your loan up until the last minute if they suspect anything fishy, and hey, better safe than sorry.

3. You missed a medical bill

Credit cards aren’t the only debt that count with a mortgage application—unpaid medical bills matter, too. When you default on medical bills, your doctor’s office or hospital is likely to outsource it to a debt collection agency, says independent credit expert John Ulzheimer. The debt collector may then decide to notify the credit bureaus that you’re overdue on your medical payments, which would place a black mark on your credit report. That’s a red flag to mortgage lenders.

If you can pay off your medical debt in full, do it. Can’t foot the bill? Many doctors and hospitals will work with you to create a payment plan, says Gerri Detweiler, head of market education at Nav.com, which helps small-business owners manage their credit. Showing a mortgage lender that you’re working to repay the debt could strengthen your application.

4. You changed jobs

So you changed jobs recently—so what? Problem is, mortgage lenders like to see at least two years of consistent income history when approving a loan. As a result, changing jobs shortly before you apply for a mortgage can hurt your application.

Of course, you don’t always have control over your employment. For instance, if you were recently laid off by your employer, finding a new job would certainly be more important than buying a house. But if you’re gainfully employed and just considering changing jobs, you’ll want to wait until after you close on a house so that your mortgage gets approved.

5. You lied on your loan application

This one seems painfully obvious, but let’s face it—while it may be tempting to think that lenders don’t know everything about you financially, they really do their homework well! So no matter what, be honest with your lender—or there could be serious repercussions. Exaggerating or lying about your income on a mortgage application, or including any other other untruths, can be a federal offense. It’s called mortgage fraud, and it’s not something you want on your record.

Bottom line? With mortgages, honesty really is the best policy.

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Prices paid for goods used in residential construction decreased 4.1% in April (not seasonally adjusted)—the largest monthly decline on record—according to the latest Producer Price Index (PPI) report released by the Bureau of Labor Statistics. The year-to-date decline (-5.4%) in residential construction inputs prices is more than three times larger than the previous record (-1.3% in 2009).

Building materials prices have fallen 6.6% since April 2019 by -0.6% per month, on average. In contrast, prices increased 0.2% per month, on average, from April 2018 to April 2019. The index now stands at its lowest level since August 2017.

Prices paid for gypsum products decreased 1.3% in April (seasonally adjusted) after climbing 2.2% in March. The price index for gypsum products has decreased 4.4% in 2020 and has fallen 9.5% since its most recent peak in March 2018.

Gypsum product prices have declined 4.4% YTD, the largest January-to-April decrease since seasonally adjusted data became available in 2012.

Although the PPI report shows that softwood lumber prices declined 10.8% (seasonally adjusted) in April, the decrease is at odds with recent prices reported by Random Lengths.  According to their weekly data, prices fell a more modest 2.7% over the month.

The discrepancy between the BLS and Random Lengths data stems from known differences in survey timing.  We anticipated this in last month’s PPI post, in which we stated that the decline over the last 10 days of March “should be captured in next month’s PPI report.”

Prices paid for ready-mix concrete (RMC) decreased 0.4% in April (seasonally adjusted), following a 0.7% increase in March. The RMC index has increased 1.1% year-to-date (YTD), which is close to the historical average YTD price change in April.

Prices were little changed from March to April in the Northeast (unchanged), Midwest (-0.2%), and South (-0.1%), but increased 1.9% in the West region (not seasonally adjusted). Since the beginning of 2020, RMC prices have decreased 3.2% in the Midwest but have climbed 5.0%, 1.1%, and 0.5% in the South, West, and Northeast, respectively.

Other changes in indexes relevant to home building are shown below.

in April (not seasonally adjusted)—the largest monthly decline on record—according to the latest Producer Price Index (PPI) report released by the Bureau of Labor Statistics. The year-to-date decline (-5.4%) in residential construction inputs prices is more than three times larger than the previous record (-1.3% in 2009).

Building materials prices have fallen 6.6% since April 2019 by -0.6% per month, on average. In contrast, prices increased 0.2% per month, on average, from April 2018 to April 2019. The index now stands at its lowest level since August 2017.

Prices paid for gypsum products decreased 1.3% in April (seasonally adjusted) after climbing 2.2% in March. The price index for gypsum products has decreased 4.4% in 2020 and has fallen 9.5% since its most recent peak in March 2018.

Gypsum product prices have declined 4.4% YTD, the largest January-to-April decrease since seasonally adjusted data became available in 2012.

Although the PPI report shows that softwood lumber prices declined 10.8% (seasonally adjusted) in April, the decrease is at odds with recent prices reported by Random Lengths.  According to their weekly data, prices fell a more modest 2.7% over the month.

The discrepancy between the BLS and Random Lengths data stems from known differences in survey timing.  We anticipated this in last month’s PPI post, in which we stated that the decline over the last 10 days of March “should be captured in next month’s PPI report.”

Prices paid for ready-mix concrete (RMC) decreased 0.4% in April (seasonally adjusted), following a 0.7% increase in March. The RMC index has increased 1.1% year-to-date (YTD), which is close to the historical average YTD price change in April.

Prices were little changed from March to April in the Northeast (unchanged), Midwest (-0.2%), and South (-0.1%), but increased 1.9% in the West region (not seasonally adjusted). Since the beginning of 2020, RMC prices have decreased 3.2% in the Midwest but have climbed 5.0%, 1.1%, and 0.5% in the South, West, and Northeast, respectively.

Other changes in indexes relevant to home building are shown below.

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eyeonhousing.org

The second week of NAHB’s online poll showed that several of the coronavirus’s impacts on the residential construction industry have become more widespread and severe.  Once again, traffic ranked as the most widespread problem, with 93 percent of respondents saying the coronavirus has had an adverse impact on traffic of prospective buyers.

This result is based on 318 responses collected online between March 24 and March 30.  As in week 1, the largest share of responses came from single-family home builders; and respondents were most often owner, president or CEO of their companies.  The geographic distribution was somewhat different in week 2, however, with a greater share of responses coming from the Northeast and West Census regions.

The week 2 poll listed eight possible impacts of the coronavirus and asked if each has so far had a major, minor, or no adverse effect on respondents’ businesses.  After traffic, 89 percent of respondents for whom the item was applicable said the virus was having a noticeable, adverse impact on homeowners’ concerns about interacting with remodeling crews, followed by the rate at which inquiries for remodeling work are coming in (86 percent), cancellations or delays of existing remodeling projects (82 percent), how long it takes to obtain a plan review for a typical single-family home (80 percent), and how long it takes the local building department to respond to a request for an inspection (78 percent).  The least common problems on the list were supply of building products and materials and willingness of workers and subs to report to a construction site, but even these were cited as a virus-induced problem by over three-fifths of the respondents.

Five of these problems were also covered in week 1 of the poll.  Four clearly worsened in week 2.  For example, the 80 percent of respondents who said the virus has had an adverse impact on how long it takes to obtain a plan review for a single-family home was up from 57 percent a week earlier.  Comparisons across weeks should be interpreted cautiously, due primarily to differences in the geographic distribution of responses.  In this case, however, the percentage increased significantly in each of the four Census regions.

Similarly, the 78 percent who said the virus has had an adverse impact on how long it takes the local building department to respond to a request for an inspection was up from 50 percent a week earlier.  Again, the increase was present and significant in each of the four regions.

As mentioned above, problems with willingness of workers and subs to report to a construction site were less widespread than the other items on the list, but the 64 percent who cited it as a virus-induced problem in week 2 was nevertheless up from 42 percent a week earlier.  Again, the rising trend was consistent across regions.

Even a decline in the traffic of prospective buyers, the most widespread problem in week 1 of the poll, was more widespread in week 2.  The incidence of the problem increased in every region except the Northeast.  The Northeast, however, showed a marked increase (from 57 to 73 percent) in the share reporting that the virus had a major, rather than minor, adverse impact on traffic.

The trend was not completely consistent across regions for the fifth item present in both weeks of the poll: supply of building products and materials.  Although the overall share reporting this as a virus-induced problem was up, this was primarily due to a particularly strong increase (from 45 to 74 percent) in the Midwest.  For additional details—including tables for each question broken down by respondents’ region, primary business, and position in the company—please see the full survey report.

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eyeonhousing.org

As COVID-19 (or the coronavirus) spreads and Americans prepare for potential quarantines, public health officials have recommended some advice for U.S. households: Namely, stock up two weeks of supplies, avoid crowds, and stay in your homes.

And that advice is fine for middle-class suburbanites with white-collar jobs. Sure, hop in the SUV and drive to the nearest Costco. Stash extra cases of canned beans in the pantry and frozen veggies in the basement freezer. Kids can hang out in their separate bedrooms or play in the backyard while parents conduct conference calls from the home office.

Of course, for people who lack these residential resources—especially those with unstable, crowded, or poor-quality housing—this situation is impossible. Not to mention the fact that workers in fields such as food service, retail, and hospitality can’t conduct their work remotely. In the face of a global pandemic, what are these Americans supposed to do?

Workers in fields such as food service, retail, and hospitality can’t conduct their work remotely. In the face of a global pandemic, what are these Americans supposed to do?

“SHELTERING AT HOME” REQUIRES GOOD HOUSING

The people who will have trouble “sheltering at home” are already among the most vulnerable populations. Estimating how many people will be affected is tricky, because these are also the most difficult populations for the Census Bureau to count. But we can predict which types of housing situations will create the greatest barriers.

Homeless persons. More than 500,000 people across the U.S. are homeless, roughly 40% of whom are unsheltered (living on streets, parks, and other open spaces). The remaining 60% live in temporary homes, including cars, shelters, or doubled-up with family. In a recent Curbed piece, Alissa Walker described the many challenges that homeless individuals face in trying to protect themselves from COVID-19, including hand-washing and storing food, which are critical obstacles.

Unaffordable or unstable housing. The poorest 20% of U.S. households spend more than half their monthly income on rent. Any loss of income—say, food service workers having their hours reduced as fewer people patronize restaurants—will put these households behind on their rent, increasing their risk of becoming homeless.

Group quarters. Some of the first U.S. fatalities from COVID-19 occurred in a nursing home outside Seattle. Contagious diseases spread rapidly in these types of group quarters, with residents living in close contact, sharing bathrooms, and eating together. Nearly 4 million Americans live in institutional group quarters such as nursing homes and correctional facilities. Another 4 million live in noninstitutional facilities, including college dorms, military barracks, and group foster homes. While colleges and universities can close dorms to prevent the spread of the coronavirus, that’s not an option for nursing homes or prisons.

Overcrowded households. Keeping the recommended 6-foot distance between people is tough for households with too many people crammed into too small of a space. Nationally, a very small share of households are overcrowded (more than two persons per bedroom). But the incidence varies substantially across population groups and cities: Nearly 15% of households with children living in high-cost metro areas are overcrowded. And even single-person households in small studio apartments or “tiny homes” will have difficulty storing extra supplies.

Unsafe, unhealthy housing. Even in the absence of contagious diseases, low-income households are more likely to live in housing that damages their health: mold and pest infestations that exacerbate asthma, for example, or lead paint and other toxic substances that harm children’s neurological development. We have virtually no data on how many people live in informal, unregulated housing, which is often ignored by local governments until disaster strikes.

TO PREPARE, PEOPLE NEED MONEY, WELL-STOCKED STORES, AND RELIABLE TRANSPORTATION

Low-wage workers who live paycheck to paycheck will be hard pressed to come up with the funds to buy two weeks of supplies in advance. Neighborhood resources matter too: Low-income urban neighborhoods have few large supermarkets or big box stores within easy reach. The corner stores and bodegas that many people rely on for supplies only carry small portions, and bulk buying from these stores isn’t just less convenient, it’s more expensive: The per-unit cost of one toilet paper roll is higher than buying a large package. Riding the bus home with a few days’ worth of groceries is one thing. Lugging home two weeks’ worth of rice, dried beans, and canned goods is another.

GIVING PEOPLE MONEY—QUICKLY—WOULD HELP. BUT IT’S NOT THE WHOLE SOLUTION.

For households who lack resources, giving people money as quickly and directly as possible would help. Short-term financial assistance would help poor families continue paying rent and buying food until the broader economy stabilizes. It would be more effective than a temporary moratorium on evictions (as some jurisdictions have enacted), since landlords also need money to pay their mortgages, property taxes, and utilities. Banks offering to allow borrowers more time on their mortgages could help homeowners as well as landlords—but the bigger concern is renter households, who have lower incomes and smaller savings.

For far too long, policymakers at all levels of government have failed to provide decent-quality, stable, and affordable housing to millions of Americans. In COVID-19, we’re only starting to see the devastating consequences of that failure.

Many of the other problems will be harder to address. To reach homeless populations, local governments will need not just money but trained staff, portable bathrooms, and modular housing. The short-term housing solutions we often use in the aftermath of natural disasters—gathering displaced people into large facilities such as gyms or convention centers—are not advisable during contagious disease outbreaks.

For far too long, policymakers at all levels of government have failed to provide decent-quality, stable, and affordable housing to millions of Americans. In COVID-19, we’re only starting to see the devastating consequences of that failure.

Sarah Crump provided excellent research assistance for this post.

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