Most people applying for a home loan today expect tighter standards after the recent mortgage crisis but many borrowers are surprised at how stringent lending remains this far into 2012. Lending requirements remain frustratingly tight as residential construction and real estate development are still weak nationwide. Even with the good news of an improving job market, tight lending restraints are not good news for home buyers and home sellers looking to take advantage of current mortgage rates.
Mortgage Credit Score Requirements
Recent data from mortgage lenders exemplifies just how tight residential home lending has become. February lending statistics showed average mortgage credit score requirements were 750 for loans closed by banks and mortgage lenders – that’s up from 740 just 6 months ago. The average LTV (loan-to-value) ratio on those loans was 76%
Denied loans had average credit scores of 699 with an LTV of 83%. The concern comes from the mortgage buy-back fears still permeating the industry after the housing crisis.
The picture for conforming loans isn’t any brighter. Conforming Loans for new home purchases had average mortgage credit scores of 764 with an average down payment of 22%. Denied applications had average credit scores of 732 and average down payments of 19%.
Find out what you can do to help your current credit rating!
If you’re considering refinancing, there’s reason to be concerned about mortgage lending standards there as well. Refinancing through Fannie and Freddie had average credit scores of 770 (the highest mark available is 850)!
No doubt, there are terrific interest rates to be had right now in the housing market. The question is how you, as a borrower, can take advantage of these low rates. Not everyone looking to buy a home is a premium borrower in the top brackets for both down payment and credit score.
Many thought by now, lending standards would have loosened and the markets would have normalized. But instead, with tighter restrictions on the packaging of mortgage instruments for investments, the banks have less money to lend and are being more careful with whom they lend it.
In a climate like this, when you’re considering your credit score for a mortgage, it’s more important than ever that you have a lending advocate on your side like the home loan professionals at Sammamish Mortgage. Choosing a loan program that makes sense for your situation is more challenging now than ever. Don’t be intimidated by stricter regulation and tighter lending guidelines in a buyer’s market when Sammamish Mortgage has the expertise and the skill to make your home ownership dreams come true.