It’s Becoming Easier for Buyers to Get a Mortgage

Lenders are showing signs of loosening up when it comes to home buyers seeking a mortgage. The Mortgage Bankers Association’s Mortgage Credit Availability Index ticked up slight in April, following an increase the previous month too. Increases in the index are indicative of an overall loosening of credit.

MBA’s index shows that mortgage credit availability has increased consistently over the last several months, coinciding with recent announcements from the federal government of programs that have been designed to open the credit box. Fannie Mae and Freddie Mac’s move to back 3 percent down payment loans as well as the Federal Housing Administration’s action to reduce its mortgage insurance premiums have helped ease credit, MBA Chief Mike Fratantoni says.

Other government offerings also helped to ease credit even more in the latest report, reflecting April data, MBA notes.

Source: “MBA: It Keeps Getting Easier to Get a Mortgage,” HousingWire (May 12, 2015) and “REALTORS® Confidence Index,” National Association of REALTORS® (April 2015)

The Biggest Hurdles to Home Ownership

With mortgage rates still near historical lows, why aren’t more home owners making a move? Housing analysts blame student loan debt, overly strict lending standards, and lost equity as the leading culprits behind a sluggish housing recovery. But what do home owners say?

Mortgage information site HSH.com surveyed 786 home owners at the end of 2013 about their experiences when it came to finding and financing their home. The top six biggest hurdles to home ownership were identified as:

  1. Home prices (flagged by 23.5% respondents): Rising home prices are not just difficult for young home buyers. Home owners aged 50 to 59 reported the highest incidence of struggling with higher home prices.
  2. Down payment (22.9%): Those aged 18 to 29 reported the least trouble with down payments, while home owners aged 30 to 39 and 50 to 59 reported the highest incidence of down-payment struggles.
  3. No issues (20.9%): A significant portion of respondents said they don’t face any hurdles to home ownership, with older home owners reporting fewer hurdles than their younger counterparts.
  4. Credit score: 12.8%
  5. Interest rates: 12.6%
  6. Property taxes: 7.3%

Source: “Survey: What’s the Hardest Part of Affording a Home?” FOX Business (July 2, 2014)

What “Credit Score” does it take to Get a Loan Today?

We find one of the biggest obstacles home buyers are facing is qualifying for financing, and a new report by the Federal Reserve shows exactly how big of struggle potential borrowers face. The report found that most banks say they are a lot less likely to issue a mortgage to borrowers with a qualifying for financingof 620 and a 10 percent down payment than they were in 2006 during the housing boom.

“A moderate net fraction of banks were less likely to originate loans to borrowers with a FICO score of 680, regardless of down payment size,” the report also said. “A modest net fraction of banks were less likely to originate loans to borrowers with a FICO score of 720 and a 10 percent down payment, although survey respondents indicated that they were about as likely to originate loans now as they were in 2006 if such borrowers had a down payment of 20 percent.”

As a recent New York Times article about the Federal Reserve’s report illustrates: “A borrower with a credit score of 720 can expect a rate of 3.70 percent on a 30-year, $300,000 fixed-rate mortgage … while someone with a score of 620 to 639 can expect a 5.07 percent rate — or an extra $242 per monthly payment.”

So while mortgage rates continue to sink to new record lows, many home buyers are finding they can’t always qualify for the low rates. This has been happening for the past 3+ years in our market. Please comment about loan conditions in your local area!

Source: “How to Pump Up Your Credit Score,” The New York Times (May 17, 2012)

Consumer’s Guide to Mortgage Refinancing

Have interest rates hit bottom? Or do you expect them to go up? Has your credit score improved enough so that you might be eligible for a lower-rate mortgage? Would you like to switch into a different type of mortgage?

The answers to these questions will influence your decision to refinance your mortgage. But before deciding, you need to understand all that refinancing involves. Your home may be your most valuable financial asset, so you want to be careful when choosing a lender or broker and specific mortgage terms. Remember that, along with the potential benefits to refinancing, there are also costs.

When you refinance, you pay off your existing mortgage and create a new one. You may even decide to combine both a primary mortgage and a second mortgage into a new loan. Refinancing may remind you of what you went through in obtaining your original mortgage, since you may encounter many of the same procedures–and the same types of costs–the second time around. 

More information at: http://www.federalreserve.gov/pubs/refinancings/default.htm