Nov 14, 2012 | Mortgage Guidelines
According to the Federal Reserve’s quarterly Senior Loan Officer Survey, it’s getting easier to get approved for a home loan.
Between July – September 2012, fewer than 6% of banks tightened mortgage guidelines — the fourth straight quarter that’s happened– and roughly 10% of banks actually loosened them.
For today’s buyers and refinancing homeowners in Worcester County area , softening guidelines hint at a quicker, simpler mortgage approval process; one which gives more U.S. homeowners better access to today’s ultra-low mortgage rates.
However, although banks are easing guidelines, it doesn’t mean that we’re returned to the days of no-verification home loans. Today’s mortgage applicants should still expect to provide lenders with documentation to support a proper loan approval.
Some of the more commonly requested documents include :
- Tax returns, W-2s, and pay stubs : In order to prove income, lenders will want to see up to two years of income documentation. Self-employed applicants may be asked for additional business information. Borrowers earning income via Social Security, Disability Income, Pension or other means should expect to provide documentation.
- Bank and asset statements : To verify “reserves”, banks will often require up to 60 days of printed bank statements, or the most recently quarterly reports. Be prepared to explain deposits which are not payroll-related — banks adhere to federal anti-money laundering laws.
- Personal identification documents : To verify your identity, banks often require photocopies of both sides of your drivers license and/or U.S. passport, and may also ask for copies of your social security card.
In addition, if your credit report lists collection items, judgments, or federal tax liens, be prepared to discuss these items with your lender. Sometimes, a derogatory credit event can be eliminated or ignored during underwriting. Other times, it cannot.
The more information that you share with your lender, the smoother your mortgage approval process can be.
As the housing market improves and lender confidence increases, mortgage guidelines are expected to loosen more. 2013 may open lending to even more mortgage applicants.
Aug 8, 2012 | Mortgage Guidelines
As another signal of an improving U.S. economy, the nation’s biggest banks have started to loosen mortgage lending guidelines.
As reported by the Federal Reserve, last quarter, no “big banks” reported stricter mortgage standards as compared to the quarter prior and “modest fractions” of banks reported easier mortgage standards.
The data comes from the Fed’s quarterly Senior Loan Officer Survey, a questionnaire sent to 64 domestic banks and 23 U.S. branches of foreign banks. The survey is meant to gauge, among other things, direct demand for consumer loans and banks’ willingness to meet this demand.
Not surprisingly, as mortgage rates fell to all-time lows last quarter, nearly all responding banks reported an increase in demand for prime residential mortgages where “prime residential mortgage” is defined as a mortgage for an applicant whose credit scores are high; whose payment history is unblemished; and, whose debt-to-income ratios are low.
Consumers were eager to buy homes and/or refinance them last quarter and 6% of the nation’s big banks said their credit standards “eased somewhat” during that time frame. (more…)
Nov 10, 2011 | Mortgage Guidelines
As part of its quarterly survey to member banks nationwide, the Federal Reserve asked senior loan officers whether last quarter’s “prime” residential mortgage guidelines have tightened, loosened, or remained as-is.
A “prime” borrower is defined as one with a well-documented, high-performance credit history; with low debt-to-income ratios; and who chooses to finance a home via a traditional fixed-rate or adjustable-rate mortgage product.
After a 2-year easing cycle, the nation’s biggest bank banks report that they’ve reversed course, and are raising the bar on mortgage approvals.
For the period July-September 2010, 88% of responding loan officers admitted to tightening their prime guidelines, or leaving them “basically unchanged”.
If you’ve applied for a home loan of late, you’ve experienced this first-hand.
High delinquency rates and defaults since 2007 have caused the banks to rethink what they will lend, and to whom. As a result, today’s mortgage lenders scrutinize assets, incomes, and credit scores to make sure that nothing “slips by”.
For today’s home buyers and would-be refinancers, the mortgage approval process can be challenging as compared to how it looked just 18 months ago.
- Minimum credit scores requirements are higher today
- Downpayment/equity requirements are larger today
- Debt-to-Income ratio requirements are more strict today
In other words, although mortgage rates are the lowest that they’ve been in history, fewer applicants can qualify. And, with more the housing market still in recovery, it’s likely that guidelines will tighten again in 2012.
Therefore, if you’re among the many people in Fitchburg wondering if it’s the right time to buy a home or refinance, consider that, although mortgage rates may fall, approval standards may not.
The best rate in the world won’t matter if you’re not eligible to lock it.
Sep 8, 2011 | Buying Real Estate, Mortgage Guidelines, Mortgage Lenders, Mortgage Rates
Mortgage guidelines appear to be tightening with the nation’s largest banks.
In its quarterly survey to senior loan officers nationwide, the Federal Reserve uncovered that a small, but growing, portion of its member banks is making mortgage approvals more scarce for “prime” borrowers.
A prime borrower is described as one with a well-documented payment history, high credit scores, and a low monthly debt-to-income ratio.
Of the 53 responding “big banks”, 3 reported that mortgage guidelines “tightened somewhat” last quarter. This is a tick higher as compared to prior quarters in which only 2 banks did.
46 banks reported guidelines unchanged from Q1 2011.
When mortgage guidelines tighten, it adds new hurdles for would-be home buyers in Fitchburg. Tighter lending standards means fewer approvals, and that can retard home sales across a region.
Just don’t confuse “tighter standards” with “oppressive standards”. (more…)
