Mortgage Lending Standards

Applying for and maintaining a mortgage is a big part of home-ownership for many. Lending standards are very different today than they were years ago. Some people worry that we’re in a housing bubble and others think there credit score wouldn’t make it possible to receive a mortgage. Read this blog to hear some thoughts about today’s lending standards.

Lending Standards Today vs. in the Housing Crisis

Some sources have claimed that we are currently in a housing bubble, but this is not the case. Below is a graph of the Mortgage Credit Availability Index (MCAI) since 2004. Basically, this represents how easy or difficult it is to get a mortgage. As you can see, mortgage availability is significantly lower than it was during the housing crisis.

Investopedia states: “In the aftermath of the crisis, the U.S. government issued new regulations to improve standard lending practices across the credit market, which included tightening the requirements for granting loans.”

All of this reduces risk for mortgagors and mortgagees and should ease any worries that we may be in a housing bubble.

Credit Scores and Mortgage Approval

Keeping Matters Current says that, “the average FICO® score on closed loans reached 753 in February.” Many have seen their credit score rise in recent years. Overall, it’s a sign of the country’s financial stability.

However, there are still many with below average credit scores. A low credit score may make it difficult to be approved for a mortgage, but it is not impossible. There is more that goes into the process than simply credit score, such as down payment. For example, Federal Housing Administration (FHA) loans will accept a credit score as low as 500 with a 10% down payment.

Every situation is different when it comes to mortgages, so it’s important to get advice and consider all your options. Our team is happy to help you in any way we can during the home buying process. Connect with us today for more information!