Mortgage requirements for home buyers are falling

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Easing mortgage requirements

There is good news for home buyers: it is finally becoming easier to get a mortgage.

After tightening lending standards during the pandemic, it seems that mortgage lenders are starting to loosen the reins of government a bit.

In fact, according to Mortgage Bankers Association, mortgage loans in April were about 2.2% easier to obtain than in March. And for what types of loans? The availability of mortgages increased by 12.6%.

This is what change means for home buyers (and refinancing organizations).

Verify Your Mortgage Eligibility Today (June 4, 2021)

Why did mortgage requirements tighten during COVID?

Last year was a risky time for lenders to lend. Unemployment reached record levels, many people lost their jobs and wages, and entire sectors of the economy were closed for months.

To protect themselves from these additional risks, many mortgage lenders have raised their loan requirements. Some have even stopped offering certain loan programs altogether (namely FHA loans, HELOC loans and non-QM loans).

For the most part, lenders demanded higher credit ratings and larger down payments compared to last year.

For example, at one point, Chase raised its credit rating requirements to a whopping 700 and asked for a 20% down payment on all purchase loans. (You can usually get ordinary mortgage with a credit rating of 620 and only 3% lower.)

Other mortgage lenders have added a second employment check – one just before the closing date – as an added layer of protection.

Mortgage Requirements Fall Again

According to the MBA Mortgage Affordability Index, these high standards are finally starting to weaken.

Overall, MCAI increased by 2.2%, indicating that standards are becoming less stringent.

Credit Compliance

Standards for credit rating, down payment and other criteria weakened the most for related loans, rising 12.6% over the month.

Eligible loans are those that meet the standards set by Freddie Mac and Fannie Mae. Agencies admit a credit rating from 620 to initial payments from 3-5% and higher.

However, lenders are allowed to set their own stricter requirements beyond the Fannie and Freddie requirements (so-called “overlays”). These overlaps are the reason that mortgage requirements vary so much from one lender to another, and the reason why some lenders are reopening to borrowers with lower credit levels than others.

If you think you should be eligible but have been turned down by one lender, it’s worth applying with several others to see if their different rules might work in your favor.

Compare mortgage options. Start Here (June 4, 2021)

Requirements for other types of loans

Jumbo loans, which are set aside for the purchase of real estate at a higher price, also increased significantly by almost 7%.

According to the MBA, government loans, which include FHA, USDA and VA mortgages, do not show this trend.

The MCAI for these programs increased by just 0.1% from March to April, indicating that lending standards remain largely unchanged.

Credit availability still not bounced back to 2020 highs

Overall, mortgage loan availability is improving. It makes it easier for many Americans To buy a house or refinancing.

However, mortgage requirements have not recovered to, or even approached, pre-pandemic levels.

Previously, the mortgage lending index was within the 170-180s. Today, only 128.1.

As the economy picks up steam after the pandemic – and as fewer and fewer mortgages are deferred – credit availability should continue to improve.

So if you are not eligible for a mortgage today, do not lose hope. The standards should continue to decline throughout the year.

If you are unsure whether you will qualify now or in the near future, see

How to Qualify in Today’s Market

Despite the surge, getting a mortgage is still more difficult than it was a few years ago.

If you are worried that you are not eligible for a loan, make sure you work with your loan before applying for a mortgage.

You should also accumulate a solid down payment and shop from at least three to five different lenders. Every mortgage lender has different qualifying standards, so doing your searches will help you find the best one for your unique situation and budget.

Comparing mortgage offers can also save you some serious money (around $ 3,000 if you get at least five offers!), According to Freddie Mac.

Confirm New Bid (June 4, 2021)

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