Getting a mortgage is getting harder

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As if rising house prices and fierce competition weren’t enough, home buyers now face a different challenge: stricter mortgage standards.

According to Mortgage Bankers Association, mortgages became more difficult to issue in the last month (in fact, 8.5% less than in May). Overall mortgage availability is now at its lowest level since September 2020, “indicating tightening standards.”

“When mortgage availability drops, it becomes more difficult to get a mortgage,” says Joey Abdullah, managing director of Bellco Home Loans. “Typically, you should have a higher credit rating, sometimes higher down payments, or, if you refinance, a higher equity position in the home.”

Conventional loans are the hardest to get

MBA data show that standards have tightened for conventional and eligible loans – those that can be purchased by Fannie Mae and Freddie Mac. In June, they decreased by 23.5%.

Refinancing organizations, investors, self-employed buyers and second home buyers should be the most worried when it comes to qualifications, Abdullah said.

“We are seeing this especially for home refinancing,” he says. “The availability of credit has also diminished for non-owner-occupied homes.”

Tighter standards stem from pandemic-triggered policy changes implemented by both Fannie and Freddie, making it difficult for those with high loan balances to refinance mortgages. The two government-sponsored agencies have also reduced the number of investment and secondary home loans they could acquire, so the number of loan options has also diminished.

Fortunately, the hardships don’t have to last long – at least refinancers… First, there is a slight lag between MBA data and reports. For example, Brian Koss, executive vice president of Mortgage Network, says he has already seen things improve in recent weeks.

“It’s actually a little weakened because you see the economy getting better,” says Koss.

Additionally, Fannie Mae and Freddie Mac launched new refinancing programs this month, which should make refinancing easier for low-income, high-loan borrowers.

The Federal Office of Housing Finance has also recently removed fee for unfavorable market last year he demanded refinancing of loans. This should reduce interest rates what ordinary borrowers see when refinancing.

“Your interest rates are more attractive than they were this time last week,” says Koss. “It’s about one-eighth of a percent.”