Home buyers in Washington State who need financing will be pleased to know that mortgage requirements have eased over the last few years. This is a trend we’ve written about in the past. Here are three ways that mortgage requirements have loosened up for Washington home buyers in 2018.
1. Broader access to low down payment programs
For many years, the FHA loan program was one of the only options for Washington home buyers seeking a low down payment in the 3% range. That particular program allows borrowers to make a down payment as low as 3.5% of the purchase price.
But over the last few years, new programs have come onto the market that offer conventional (non-FHA) mortgage loans with down payments as low as 3%. So there are more options in that area.
We wrote about one of these programs, Freddie Mac’s HomeOne, back in April. Unlike similar programs they’ve offered in the past, this one caters to “borrowers without geographic or income restrictions.”
This is one way mortgage requirements have eased for Washington home buyers. Borrowers today have more options when looking for a home loan with a relatively low down payment. Requirements have eased in other areas as well, including debt ratios.
2. Higher debt limits for some borrowers
The amount of debt you currently have — and the amount you’ll end up with after taking on a mortgage loan — can also affect your ability to qualify for financing. This is where your “debt-to-income” ratio comes into the picture. The DTI is one of several tools lenders use to ensure that you’re not taking on too much debt, with the addition of a home loan.
This is another area where mortgage requirements have eased in Washington. These days, Freddie Mac and Fannie Mae are supporting loan programs that allow for a higher debt level. A few years ago, the debt-to-income requirements for borrowers were more strict. They’ve loosened up a bit in recent years.
For example, in 2017 Fannie Mae announced a changed in its basic mortgage requirements that would allow for higher debt ratios. They raised the maximum DTI ratio for borrowers from 45% to 50%. These changes were made to broaden access to mortgage financing, for borrowers who are otherwise well-qualified for a loan.
3. More financing options and programs available
This is an offshoot of the two items mentioned above. Generally speaking, the mortgage industry is more flexible and diverse today than it was a few years back. Access to credit tightened considerably in the wake of the housing crisis of the late 2000s (a rare occurrence). But things have gotten back to normal, for the most part. Today, there are many programs available for borrowers, and a lot of flexibility.