Lenders relaxing underwriting standards
Roseville, Calif. – A recent report from the Mortgage Bankers Association (MBA) indicates lender requirements for down payments, credit scores and other terms are finally beginning to ease which is great news for potential home buyers.
They also report some lenders are expanding the types of mortgages they offer. This is after, what seems like forever, the big lenders appeared to work hard to find ways to decline loan applications. Lenders, prompted by government regulations, tightened loan requirements in the aftermath of the housing crisis.
Much of the improvements in lending are part of a government effort to reduce regulations and improve affordability in the housing market. Fannie Mae, a giant in the secondary market, is now purchasing conventional mortgages which have down payments as low as 3 percent. According the MBA report, Freddie Mac is planning to do the same in late March. This change alone will provide much potential credit worthy buyers into the housing market.
The Federal Housing Administration has been consistently guaranteeing insured loans with as little as 3.5 percent down (See Good News for FHA Borrowers) They recently significantly reduced their upfront mortgage insurance premium which allows more home shoppers to qualify or to obtain larger loans.
Overall, we are beginning to see lenders loosening their underwriting standards and getting back to the standard of mortgages being a profit center they want to grow. This business practice allows them the opportunity to expand lending to a larger range of borrowers which includes those who do not have a large down payment and those who may not have high credit scores.
Wells Fargo is a good example of a lender who is attempting to grow their mortgage business. They have relaxed their policy on down payment gifts to borrowers from family and friends. They previously required borrowers to contribute at least 5 percent of the total costs on a home purchase from their own finances in order to qualify. They have reduced that requirement to 3 percent which allows for greater gift assistance.
If you or someone you know is considering buying, I would happily answer questions. I am available at the MagnumOne Realty office in Roseville at (916) 899-6571 and email at [email protected].
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