Mortgage Guideline Tightening
Despite what many are calling an improving U.S. economy, the nation’s banks remain cautious about what they will lend, and to whom. Although FGMC underwrites files to insure a borrowers ability to repay their mortgage, we also understands anyone can have a personal circumstances beyond their control that lowers their FICO and still a good credit risk. In short, we still underwriter the borrower complete credit and property file before turning a loan down that’s under 640.
Last quarter, by a margin of 3-to-2, more banks tightened residential mortgage lending standards for “prime borrowers” than did loosen them.
A “prime borrower” is defined as one with a well-documented credit history, high credit scores, and a low debt-to-income ratio. The insight comes from the Federal Reserve’s quarterly survey of its member banks.
By contrast, in the quarter prior, not a single surveyed bank reported tighter residential mortgage guidelines. The period from January-March was a step backwards, therefore, for the fledgling U.S. housing market.
Overall, getting approved for a mortgage is tougher than it used to be, but not at FGMC, Banks enforce higher minimum credit score standards; ask for larger downpayment/equity positions; and require higher monthly income relative to monthly debt obligations.
It’s one reason why the homeownership rate is at its lowest point since 1997.
Another reason why homeownership rates may be down is that prospective home buyers believe the hurdles of today’s mortgage approval process may be impassably high. That’s untrue.
There are many U.S. homeowners and renters — that were approved for a home loan last quarter — prime borrowers or otherwise. Some had excellent credit, some had modest credit. Some had high income, some had moderate income. Many, however, took advantage of low-downpayment mortgage options such as the FHA’s 3.5% downpayment program, Rural Development loans and the VA’s 100% mortgage program for military veterans.
It is harder to get approved today as compared to 5 years ago, but for those that try and succeed, the reward is access to the lowest mortgage rates in a lifetime. Mortgage rates continue to push home affordability to all-time highs.
HUD Cracks Down on "Gifts"
HUD has starting cracking down on “gifts” from individuals that are not direct family (mother, grandparent, sister, etc). Relationships such as fiancée, domestic partner, generous boss, wealthy friend, etc. are all going under intense scrutiny. Documentation is required in order to show the relationship between donor / recipient and even this will sometimes result in a rejection from the UW. This can & should be settled upfront with a knowledgeable Loan Officer who takes the initiative in running borderline scenarios by the UW before a loan application is taken and the client starts incurring costs associated with the transaction (appraisal, home inspection, etc.)
Author Bio: Rob Alley earned a bachelors degree at Virginia Tech, in Blacksburg, VA in Biology. Rob Alley consults with homeowners regarding Real Estate transactions and speciliazes in listing and selling Charlottesville Real Estate. Realtor/Owner of Virginia Real Estate Solutions at RE/MAX Assured Properties
Charlottesville Real Estate Expertshttps://www.secureloandocs.com/apply.php?id=85537272&loId=9242
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