It’s Much Easier To Get A Mortgage

It’s become a whole lot easier to get mortgage-approved.

According to a recent Federal Reserve survey, nearly one quarter of U.S. mortgage lenders eased mortgage loan approval standards during the second quarter of this year.

With current mortgage rates near 14-month bests, it’s an excellent time to refinance a home or buy one.


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 Fed survey’s purpose is to uncover consumer and business demand for bank loans, and the banks’ willingness to make such loans to customers.

Among the questions is one in which the Fed inquires on mortgage lending guidelines — specifically prime residential mortgages, where “prime residential mortgages” are defined as a mortgages for borrower whose credit scores are 740 or higher; whose debt-to-income ratios are lower than average; and, whose mortgage features the standard amortization schedule common to a fixed-rate or an adjustable-rate mortgage.

The Fed Senior Loan Officer Survey shows that prime mortgage borrowers have an easier time getting mortgage-approved at today’s mortgage rates.

23.9% of banks reported an easing of mortgage loan standards during this year’s second quarter — more than twice the percentage from earlier this year. Banks are reducing FICO requirements, lowering qualification hurdles, and bringing more loans to closing.

According to mortgage-software firm Ellie Mae, lenders closed more than 60 percent of all loans for the first time since such data has been tracked, beginning in 2011. By comparison, just fifty-four percent of loans closed in 2013.

The loosening of lender standards also means fewer investor overlays.

“Investor overlays” are mortgage approval standards which are enforced by a bank, but not required by the government.

As one example, for an FHA loan, the government will allow FICO scores of 580, or even no FICO score at all, from a mortgage applicants. Some lenders, though, via an investor overlay, will require a 620 FICO score at minimum.

Another example of an investor overlay is the required payment history on a HARP loan. Government program guidelines limit a borrower to one late payment within the last 12 months. Some lenders, though, opt to allow none.

If you’ve been turned down for a mortgage within the last two years, it may be worthwhile to re-apply today. The reasons for which your application was denied may be no longer matter.


In addition to revealing a loosening in U.S. mortgage guidelines, the Fed’s Senior Loan Officer Survey also showed rising demand for purchase money mortgages.

Between April and June, more than half of responding banks reported rising demand for purchase mortgages as compared to the prior quarter — a figure which jibes with other housing-related data.

This spring, Existing Home Sales rose above 5 million units on seasonally-adjusted annualized basis for the first time since last fall. New Home Sales showed a similar improvement, bouncing back after a series of soft tallies.

Furthermore, U.S. home builders report an increase in buyer foot traffic through their model units.

Falling mortgage rates have likely played a role.

During the second quarter, 30-year rates made slow, steady declines, falling through nine of 13 weeks. Rates dropped 25 basis points (0.25%) and, by the time the quarter ended, many lenders were quoting rates in the 3s.

There is evidence that demand for homes will remain strong through the rest of 2014 and into 2015. The forward-looking Pending Home Sales Index has posted strong figures through June and the national supply of homes for sale remains low.


Realtor with Greg Garrett Realty, actively licensed in the state of Virginia

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