The requirements to qualify for a mortgage were pretty tight early in the pandemic, as lenders grew concerned about the pitfalls of layoffs and widespread income losses. With unemployment rates at record levels and a sluggish economy, lenders viewed borrowers as significantly riskier. That changed in 2021, though, as the economy picked up steam and unemployment rates plummeted.
As of August 2021, mortgage credit availability was up by 3.9% month over month, which indicated that lenders were loosening the reins of borrowing. With looser credit score requirements, down payments, and related criteria, a larger pool of borrowers could qualify for mortgage loans. Still, with extremely low amounts of housing inventory, there was a ton of competition for available homes—and the new pool of buyers simply added to the issue.