Home Buyers: ‘Do Not Fear’

Home shoppers no longer need to tremble all the way to the lenders’ office or have nightmares over being denied  a home loan – all the troubles that have been prominently spotlighted by many news reports in recent years. A new report confirms: It’s getting easier to get a mortgage – and as a bonus, borrowing costs are still low.

Over the past year and a half, the federal government and enterprises have taken several steps to open up the credit box, and the efforts may finally be showing signs of paying off.

Credit scores on closed loans in September dropped to the lowest level since Ellie Mae began collecting the data in August 2011, according to Ellie Mae’s latest Origination Insight Report. The average FICO score for closed loans has fallen throughout the year – from 731 in January to 723 in September.

Source: “Is the Credit Box Finally Showing Signs of Opening Up?” HousingWire (Oct. 21, 2015) andFreddie Mac

Days to Close a Home Loan Drops to New Low

Both closing times and credit requirements are dropping, according to the latest report from Ellie Mae. The mortgage industry services provider states in its Origination Insight Report that the average number of days to close a loan has dropped to 37 in July, compared to 41 days in June. Ellie Mae notes that’s the the lowest average they’ve seen since they began tracking. On average, it took 38 days to close a FHA loan, 36 days to close a conventional loan, and 38 days to close a VA loan in the month of July.

The report also notes that the average FICO score fell one point to 727 in July, reversing a four-month trend of increases. Researchers also noted another “sign of easing” is that 32 percent of closed loans had an average FICO score under 700 last month, compared to only 25 percent one year ago.

Meanwhile, the purchase market climbed in July, as the share of closed purchase loans hit 67 percent, up 2 percent from June – and the highest percentage since Ellie Mae began tracking the data in 2011. Refinanced loans took up the remaining 32 percent of closed loans.

The report focuses on loans that closed or were denied over the course of a month, comparing the data to other time frames, according to Ellie Mae.

Source: “Ellie Mae Releases July 2014 Origination Insight Report,” (August 20, 2014)

Are Buyers Too Afraid of Mortgage Rejection?

Fifty-six percent of all potential home buyers—those who want to buy a home within the next 24 months—say they’re waiting to purchase because they fear being rejected by lenders. What’s more, 30 percent of current home owners say they don’t think they could qualify for another loan, according to a national consumer survey of more than 1,000 Americans by the firm OmniTel.

The survey also found that 74 percent of potential buyers who need a mortgage say they have not taken the steps to qualify or investigated the mortgage process yet. The survey showed that many potential buyers believe they need nearly perfect credit scores to qualify for a mortgage today. Eighteen percent say they believe borrowers need a minimum FICO score of 770 or higher to qualify. Also, about a third of potential buyers say they believe their debt-to-income ratios are too high to qualify.

But these fears may be overblown. Ellie Mae, which provides a loan origination and tracking software for the mortgage industry, says that 33 percent of all new loans in March had borrower FICO scores below 700. The percentage has been growing, too—a year ago it was 27 percent. The Federal Housing Administration insured loans with average FICO scores of 684 in March. For conventional mortgages, the average remains higher at 755, but is down from 759 a year ago.

Debt-to-income ratios aren’t as strict as most potential buyers believe either. FHA’s average ratio in March for purchase loans was 28 percent; Fannie Mae- and Freddie Mac-backed loans averaged 22 percent, according to Ellie Mae data.

Source: “Mortgages Are Easier to Obtain Than Many Prospective Home Buyers Might Expect,” The Washington Post (April 25, 2014)

Will Lending Standards Loosen Up This Spring?

Lenders tightened up underwriting standards the last few years, making it difficult for creditworthy buyers to get approved for a loan. Federal Reserve Chairman Ben Bernanke said last week that the tightening of the mortgage market “has gone too far.”

But recent data released by Ellie Mae shows there may be some improvement in the loosening of credit. “The credit box may be expanding,” says Jonathan Corr, Ellie Mae president and CEO.

In its latest data release, Ellie Mae found that the average FICO scores for approved loans has started to drop — a 767 FICO average for all of 2012 compared to 761 FICO average for all approved conventional loans during February.

More applications for mortgages also were approved — 56.8 percent in February versus 55 percent in January, a slight improvement.

The refinance share of loan originations fell to 68 percent in February, from 73 percent in January, which is “a good sign since it indicates lenders are getting more serious about going after the purchase market,” Inman News reports.

Many  say that banks are too strict with home loans. Lawrence Yun, chief economist for the National Association of REALTORS®, estimates that if credit conditions returned to “normal,” about 500,000 to 700,000 more home sales would occur this year.

Source: “Encouraging Signs That Mortgage Credit Is Easing,” Inman News (3/26/13)

“Credit Scores” can differ from What Lenders Use!

Interesting news to share! “Many consumers incorrectly believe that the scores they purchase are the same ones used by lenders,” according to a CFPB report. As such, a “substantial minority” of consumers are at risk of overpaying for credit or in applying for loans that they’re ineligible for?

Even the slightest variation in credit scores can make a big difference and has the potential for qualifying for certain kinds of loans, according to the CFPB.

The CFPB sites FICO scores, which are widely used by lenders, as having different credit scoring models for lenders and consumers that can vary. VantageScore also has different types of credit scores, CFPB says.

CFPB is evaluating the accuracy that credit reporting firms provide to consumers. It encourages consumers that when they review their credit reports to focus not on credit scores but to check the accuracy of the payment history on the reports because the firms use that to calculate scores. Consumers should take steps to correct any errors they find on the payment history of their reportsto help improve their scores, CFPB notes.

Source: “Regulator Sees Flaws in Credit-Score Information,” The Wall Street Journal (Sept. 25, 2012)