Mortgage Lenders Forced to Lower Credit Score Requirements

In the years after the burst of the housing market bubble, mortgage applicants had to have credit score above 650 in order to quality and some lenders set their minimum threshold even higher. Now things are changing at a fast pace. Major lenders and many smaller companies are now willing to approve applicants with scores way below 600.

The statistical data shows that the lenders with the lowest credit score requirements approved mortgage applicants with an average credit score of 571 during the fourth quarter of 2013. For comparison, the average score of approved applicants by these lenders during the final quarter of 2012 was 599. Some of the largest lenders have already announced that they will be approving applicants with score of 600 and possibly lower provided that they meet other eligibility criteria. It is expected that in the near future lenders will begin to approve home buyers with scores as low as 500 for FHA loans once again.

Even though lenders are still very cautious due to the lessons learned throughout the past six years, there are several factors which push them into lowering credit score requirements. Lenders experience higher operating costs due to the new mortgage regulations which are in force since January 2014. This coincides with an upward pressure on the home loan rates and the forecasts that they will increase considerably by the end of 2014. At the same time, 1 in ever 3 consumers in the US has credit score lower than 650.

Even though mortgages are now more easily accessible, home buyers should be cautious about the lowering of the credit score requirements. Lower credit score always results in higher interest and reduced affordability. how to get backlinks Despite other requirements having become stricter, the risk of delinquency has to be evaluated thoroughly. Experts comment that there is not a serious risk for the housing market as a whole at least for the time being, but both borrowers and lenders have to be careful.

To read more articles regarding mortgage news and mortgage loans that are up to date news – please go here!

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