Lenders Attempting to Increase Mortgage Accessibility


Both major and smaller lenders lowered their mortgage requirements in April 2014 in order to attract more borrowers. This coincides with a decrease of the home loan applications of 5.9% on a seasonally adjusted basis. The efforts of lenders may not be rewarded, however, given the higher home prices and the mortgage rates which are 1% higher than they were a year ago.

The largest US lender, Wells Fargo, announced in mid April the lowering of their minimum credit score requirement for conventional loans from 660 to 620. The other major lenders and the smaller ones are expected to follow in an attempt to retain their market positions. In fact, many smaller lenders have already made a move forced by the slowing activity in the mortgage market. Some have lowered their down payment requirements to 5% and even to 3% of the property value. Others have started offering certain types of home loans without insurance.

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Despite the stricter rules which lenders are required to apply regarding the debt-to-income ratio of mortgage applicants, there is actually an increase in the number of borrowers debt-to-income ration exceeding 43%. The share of these borrowers was 16% in March 2014. This corresponds to an increase of 2.6% from the same time of 2012.

There is an overall improvement in the chances of mortgage applicants with lower credit score to secure a loan. In March 2014, some 23% of all new home loans went to borrowers with credit score lower than 720. For comparison, the share of borrowers with credit score lower than 720 in 2012 was just 15.6%. The increase of over 7% suggests that as mortgage rates become higher lenders relax their requirements.

The index measuring the strictness of mortgage requirements is currently at its lowest point in two years. At the same time, it is much lower compared to the level which it held during the housing market boom before the market collapse of 2007.



Christian Calvin mortgage Christian is a contributing writer for Mortgage.info. He is a graduate from the University of Tennessee with a degree in Communications and a concentration in Broadcasting. Christian has served as vice-president for a privately-held company for more than 20 years. Additionally, he has also applied his writing and business knowledge to various websites with a focus on business and sports news . . . both of which are passions. Christian enjoys playing golf and spending time with his family and friends.

Contact: christian@mortgage.info

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