[NEWS] Federal Reserve Study Says It's Getting Easier to Qualify for a Home MortgageYahoo News (Homes Division)
reported this morning that buying a home is actually getting easier. They add that if you've gotten turned down for a mortgage in the past few years, now may be a good time to re-apply. "That's because, according to Ellie Mae research, in July 2014, 67 percent of all mortgages applied for closed. That's way up from six months before in January 2014 and also in July 2013, when the rate of mortgages that closed were at just 53 percent at both times."
(Source: Yahoo Homes)
According to the president of Ellie Mae, Jonathan Corr - this is due, in part, to lenders easing their qualifying standards.
Yahoo goes on to point out three key reasons the industry is getting more flexible:
#1 - Lower Credit Score Requirements
"You'll be happy to know that the required credit scores to qualify for a mortgage have come down. In fact, in July of 2014, the average score for qualification hit 727. And although that might still seem high, consider that it has been as high as 750 in the past few years, according to Corr...That fact is reflected in the finding that 32 percent of closed loans had an average FICO score of under 700, up from 25 percent in July 2013. As for denied mortgage applications, the average credit came in at 689, down from 702 in July, 2013." (Source: Yahoo Homes)
#2 - Higher Debt-to-Income Allowances
"First, it's important to understand that lenders assess your debt through what is known as your debt-to-income ratio. Simply put, this is the percentage of your gross monthly income that your total monthly debt obligations take up...So, if your gross monthly income was $5,000 and all your debt payments came to $1,500 per month, you're DTI would be 30 percent. You would also be in really good shape to qualify for a mortgage, by the way, according to Ellie Mae's data." (Source: Yahoo Homes) Thinking of refinancing? Grab our free worksheet to quickly calculate your LTV and assess all of your options here »
#3 - Fewer Investor Overlays
"Investor overlay is a fancy term for stricter standards imposed by the lender, or bank, but not required by the government...Lenders that handle FHA mortgages are allowed to set their own investor overlays - as long as they don't contradict FHA guidelines - and traditionally, they have, says Duffy. For example, due to fears of making bad loans, lenders have made the cutoff for FHA mortgages as 620 to 640 for many years, he says...But the good news for you is that thanks to the strengthening housing market and economy, lenders are imposing less restrictive overlays, says Duffy. In fact, recently, Duffy says most major lenders have lowered that score minimum to 600. Still not the FHA floor of 580, but a good sign for borrowers." (Source: Yahoo Homes) Photo credit: istockphoto Read the entire article from Yahoo Homes Here »
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