Mortgage lending appears to be loosening. That is, IF you're only looking at certain data.
In its quarterly survey of member banks, the Federal Reserve asks senior loan officers around the country whether their "prime" residential mortgage guidelines had tightened within the last 3 months.
A prime borrower is one with a well-documented credit history, high credit scores, and a low debt-to-income ratio.
Of the 54 responding banks, just 2 said its guidelines had tightened during the period October-December 2010. That's less than 4 percent. And, by comparison, 95 percent of banks said guidelines remained "basically unchanged".
The remaining banks reported a loosening.
Is this a positive sign for the housing market, and for home buyers nationwide? Or is it merely that guidelines have already become so strict that there isn't much else to require from our consumers? If banks have stopped raising the hurdles of home loan approval, in theory, more would-be buyers will be approved.
It's much tougher to get a home loan today versus 5 years ago. Delinquencies and defaults have changed how banks review loan applications. Today's underwriters are more conservative with respect to household income, total assets and overall credit scores.
Even as compared to January 2010, approval standards are higher :
- Minimum credit score requirements are higher
- Downpayment/equity requirements are larger
- Maximum allowable debt-to-income ratios have been lowered
Although mortgage rates remain low, qualification standards, in my opinion, have not eased up, but rather remained the same for the most part. Based on last quarter's banking survey, however, this data only makes it look like mortgage applicants may find approvals easier to come by soon. I must say, I'm not convinced that approvals will come easier just because several banks didn't report a 'tightening' of their guidelines. With 6 years in the mortgage business, I know that low rates don't matter, after all, if you're not eligible to get them.
The housing market is absolutely growing stronger and lending changes everyday. Be careful what data you read and placing your trust in charts that could possibly be misleading. You also should not allow charts or data to scare you into not purchasing. You would be surprised at the amount of clients I prequalify who weren't at all confident in their ability to purchase a home initially and ended up achieving the American dream of homeownership. Your best bet is to contact a local loan officer and get straight answers.
As always, I am available to answer your questions.
~Christina Livingston, ACOPIA Home Loans, Franklin, TN
(615) 656-2821 office (615) 586-3178 cell email@example.com
Yes, we are a direct mortgage lender.
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