Are Lending Standards Loosening

Are Lending Standards Loosening

Pre-housing crisis, it was easy for a buyer to get a mortgage. Post-housing crisis, banks set the strictest rules for lending the housing market had seen in decades. Mortgage approvals were hard to come by as banks increased their credit standards; by 2011, it took an average credit score of 750 to get a mortgage approved. According to the Urban Institute, as many as 1.2 million loans were denied as a direct result of the increase in borrowing requirements. The banks' actions might have protected them from losing profits due to foreclosures and short sales, but it also prevented the housing market from making a full recovery.

Refocusing Their Efforts
After the housing crisis, banks and lenders focused their efforts on the refinancing side of their businesses. But with the increase in rates over the past year, fewer borrowers are looking to refinance. And so, to boost business, banks have turned their attention back to the housing market. By making it easier for some buyers to borrow money, lenders are looking to increase the demand for mortgages.

Enticing Borrowers
Borrowers of Fannie Mae and Freddie Mac-backed loans will now find it easier to get pre-approved for a mortgage due to Wells Fargo's decision to cut its minimum credit score from 660 to 620. But the loans come with conditions; borrowers must prove they can afford all the costs associated with home ownership. In addition, Wells Fargo borrowers might have to explain a credit history event or prove the stability of their employment. Smaller banks are also doing their part to assist the housing recovery. The US unit of Canada's Toronto Dominion Bank waived the requirement for mortgage insurance for certain loans, along with lowering down payments to three percent.

Loosening Up
According to a Mortgage Bankers Association index, credit standards in March were the loosest the market has seen in at least two years. With more borrowing options open to home buyers, qualifying for a mortgage is now an achievable goal for many Americans.

If you have been thinking of buying a home, now just may be the perfect time. Please call/text me at 972.896.8770 for your FREE consultation.

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Dated: June 5th 2014
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