Good news for potential home shoppers: A Mortgage Bankers Association index shows lender requirements regarding credit scores, down payments, and other key terms are finally loosening up. Some lenders are even expanding the types of mortgages they offer. These moves come after years of lenders tightening loan requirements.
The newly-released MBA index shows recent improvements in lending are mostly tied to the government’s efforts to ease regulations and improve affordability in the housing market. For example, mortgage financing giant Fannie Mae is now allowing purchases of conventional mortgages that have down payments as low as 3 percent; Freddie Mac is planning to do the same for mortgages closed on or after March 23.
Also, the Federal Housing Administration, which insures loans with down payments as low as 3.5 percent, reduced its upfront mortgage insurance premiums last month, which is expanding eligibility for home purchases to thousands of potential home shoppers.
Source: “Lenders Begin Easing Requirements to get a Mortgage,” The Los Angeles Times (Feb. 22, 2015)
Consumers often overestimating the down payment needed to buy a home, according to Christina Boyle, vice president and head of single-family sales at Freddie Mac.
Consumers believe they need 11 percent to 15 percent in order for lenders to approve them for a loan, according to a survey of renters and non-home-owners conducted by Zelman & Associates in New York. Thirty-nine percent say they need at least 15 percent of the purchase price in order to qualify for financing. Only 28 percent of respondents say they would even qualify for a mortgage.
But in reality, home buyers often can qualify for a conforming, conventional mortgage with a down payment of as little as 5 percent — and sometimes even 3 percent — Boyle writes. So far in 2014, more than one in five borrowers who took out conforming, conventional mortgages put down 10 percent or less.
Boyle says that buyers should also be encouraged by the abundant down-payment assistance programs that exist to help break into home ownership. Every state in the U.S., as well as many cities and counties, offer down-payment assistance programs for qualified borrowers, such as the American Dream Downpayment Initiative and HOME Investment Partnerships Program.
Source: “Down Payments: Today’s Most Persistent Misconception About Mortgages,” Freddie Mac (June 16, 2014)
While college-educated workers usually pull down higher incomes than those who do not obtain a post-secondary degree, a new report indicates that many new college graduates will be unable to obtain a mortgage because their student loans will push their debt-to-income ratio too high.
Student loan debt soared to $1 trillion this year. The report from Young Invincibles, “Denied? The Impact of Student Debt on the Ability to Buy a Home,” found that today’s college graduates are actually worse off than previous generations, financially speaking. The authors estimate the average 30-year-old college graduate looking to purchase a home would need to spend about half of his or her monthly income on mortgage, student loan, credit card, and car payments, leaving them ineligible for many home loans, including those guaranteed by the Federal Housing Administration.
“As education debt grows, it pushes more borrowers out of the housing market, potentially adding another drag to an economy only just emerging from the Great Recession,” said Rory O’Sullivan, policy director at Young Invincibles.
The report does not factor in credit scores or down payments, which also greatly affect mortgage attainability. Please provide your thoughts.
Source: “Student Debt Pushes Homes Out of Reach,” Pittsburgh Post-Gazette (08/21/12)
More see now is a good time to buy! Home buyers may begin to jump off the sidelines this spring as they get more urgent about purchasing a home, fearing that home price and mortgage rate increases are on the horizon.
Housing surveys in recent weeks have shown that more Americans are seeing now a great time to purchase a home. In the most recent survey, 73 percent of Americans say now is a good time to buy, according to the latest Fannie Mae Housing Survey conducted in March. That’s up from 70 percent in February who said it was a great time to buy.
“Conditions are coming together to encourage people to want to buy homes,” says Doug Duncan, Fannie Mae’s chief economist. “With an increasing share of consumers expecting higher mortgage rates and home prices over the next 12 months, some may feel that renting is becoming more costly and that home ownership is a more compelling housing choice.” Is your local market concurring these forecast?
Indeed, more buyer urgency is evident in the market. Thirty-three percent of those surveyed by Fannie say they expect home prices soon to increase, which is the highest percentage in a year. What’s more, nearly 40 percent say they expect mortgage rates to rise in the next year too, which is also up from previous surveys. We recommend checking with a local lender for your qualifications, down payments and loan type.
Source: “More Americans Think It’s Time to Buy a Home,” MSN Real Estate (April 9, 2012)