A New High for Mortgage Availability, Concerns Continue
After the financial and housing debacle of recent years, we've all been hoping for a big turnaround. In recent years we've seen most housing markets rebounding, with slow but steady and strengthening progress. However, mortgage availability with lenders has threatened to kill this progress having run scared for a good run with tight credit restrictions. So tight, in fact that many would be buyers were prevented from moving forward with the dream of home ownership.
Now it would seem, that lending policies, while still much (and responsibly) tighter than the sub prime fiasco of the past, have become reasonable enough for a much larger pool of home buyers. If the credit score is not quite where it needs to be it's not so far out of reach that a would be buyer can't fix it with a little time and attention to their unique credit and financial profile.
The Mortgage Bankers Association Index marked 114 in March, and the highest reading in the index's three year history. The MBA Index reading shows that buyers' access to mortgage credit is now at it's highest level of the last three years with expectations that buyer credit standards will loosen yet more before the end of 2014 but the industry and housing market still both have a way to go.
Conflicting Signals About Mortgage Credit
“I don’t think there’s any question that mortgage underwriting has gotten easier or is looser than it was two or three years ago, but it’s nowhere near where it was in 2005, 2006,” Guy Cecala, publisher Inside Mortgage Finance, told The Wall Street Journal. “We are talking about easing from extremely tight underwriting standards.”
According to the Federal Reserve’s recent senior loan officer survey nearly 17% of larger banks and lending institutions have recently relaxed their credit standards on prime purchase mortgages, 5.6% have tightened standards and the remaining left standards the same,
Despite this "good news" some housing experts continue with expressed concerns that new rules for both lenders and borrowers this year would once again tighten and restrict credit access. According to the American Bankers Association recent survey, 80% of bankers expect a "measurable reduction in credit availability." On the flip side, the ABA's executive Vice President Bob Davis states he believes that those standards will lighten up as these lenders adapt to the new rules. “There will be a tendency for some liberalization over the course of the year,” Davis told The Wall Street Journal.
Personally, I prefer to refer clients to a local mortgage broker, not a banker so my clients pay less in up front fees. Banks get excited when someone walks in asking for a home loan due to these added profits while mortgage brokers around here seem offer better deals. Interestingly, many buyers believe using their own bank where they have accounts is going to get them the best deal considering they're a current customer, but it's not necessarily true; shop around. Mortgage brokers around here (SW Ohio) on average will give a buyer a better deal on home loans and seems to me that locally, mortgage brokers have found surer footing while many local banks are still trying to find their "sea legs" in this current state of economy. Best bet is to do some comparison shopping as this landscape is constantly changing, and if you can buy, now is the time.