For “prime” borrowers, it’s getting easier to get a mortgage.
According to a Federal Reserve survey of more than 65 banks, very few lenders are tightening mortgage guidelines anymore as the U.S. economy improves, and as home values climb nationwide.
It’s a good time to be a home buyer.
Mortgage Standards : Simpler And Easier In 2013
Once per quarter, the Federal Reserve conducts a survey in which it asks its member banks about the current lending environment. The survey covers a wide-range of loan types, both commercial and residential.
The questions are meant to uncover current consumer and business demand for bank loans, and the banks’ willingness to make loans to its customers.
One such question deals with the prime residential mortgage, where “prime residential mortgage” is defined as a mortgage for a borrower whose credit scores are 740 or higher; whose debt-to-income ratios are lower than average; and, whose mortgage is either a “standard” loan type such as a fixed-rate mortgage or an adjustable one.
Prime borrowers had a easier time getting mortgage-approved between April-June 2013. Just two surveyed banks said that prime mortgage guidelines tightened.
As a percentage of all responding banks :
- 3.0% reported mortgage guidelines tightening
- 86.6% reported no change in mortgage guidelines
- 10.4% reported mortgage guidelines loosening
Loans are getting “easier” even as demand for loans grows. More than 58% of banks say that demand for purchase loans has climbed since last quarter. Demand for FHA loans and VA loans may have seen a similar spike.
Only 9 percent of banks say demand for purchase loans has dropped, a data point which is consistent with this year’s housing market rebound. Builders report that foot traffic has reached its highest level in 7 years, and U.S. home inventory is barely keeping pace with today’s active home buyers.
Furthermore, because some banks are loosening credit requirements for home equity lines of credit (HELOC), “piggyback mortgages” are becoming more common.
Demand For HARP Loans Remains Strong
Separately, the Federal Housing Finance Agency (FHFA) released data showing strong demand for the Home Affordable Refinance Program (HARP). U.S. lenders closed more than 86,000 HARP 2.0 loans in May 2013, raising the program total to 2.65 million closings since inception.
At the current pace of closings, more than 1.1 million HARP loans will close in 2013, which would mark the second straight million-plus transaction year. However, should HARP 3.0 pass Congress this September, the number of HARP closings could top even two million.
There are scores of U.S. homeowners who remain HARP-eligible. The passage of HARP 3.0 may entice them to finally refinance.
HARP 3.0 is rumored to include a change in program start date from May 31, 2009; an allowance for non-Fannie Mae and non-Freddie Mac mortgages; a reduction in loan closing costs; and, fewer lender restrictions.
Mortgage Rates Near Record-Lows
As a home buyer or refinancing household, if may not feel like mortgage standards are loosening, but they are. There are fewer documentation requirements as compared to 24 months ago, and mortgage approval rates are climbing.
Plus, mortgage rates are low. See how today’s mortgage market can help your household budget.