After a long period of not enough houses for sale and tough mortgage qualification standards, buyers could use some good news. That good news is the approval bar to qualify for a mortgage is expected to be lowered going forward. This isn’t going to make it more affordable for buyers to complete a purchase but it will qualify more buyers to be in the game. The good news is that lenders want to approve you for a mortgage even if you don’t have a stellar credit score.
FHA home loans are the most popular mortgages among first-time buyers. According to the FHA, you can be considered a first time buyer if you have not been an owner in a primary residence for at least three years. The reason FHA loans are so popular among first time home buyers is because of their flexible qualifying requirements.
Theoretically, FHA-backed mortgages are available to borrowers with FICO score as low as 580. But in practice most lenders add 'overlays' on these minimum requirements. Hardly any lender will approve any loan (conforming or FHA) for borrowers with credit scores under 620. The bright spot is that lenders have been rethinking this standard. A report released by CoreLogic in the second quarter of 2017 was an early indication the lender sediment is changing. At the time, the uptick in risk exposure was still conservative and in line with the period of 2001 to 2003, a timeframe that is considered to be a normal baseline for credit risk. But risk exposure now appears to be changing even more.
A new survey conducted by Magilla Loans for home and business loans, found by an overwhelming margin that lenders expect to lend more in 2018 than they did in 2017. "Of the emerging trends disclosed in the lender survey, the most prominent is that nearly all lenders will be more aggressive in 2018, pointing to a positive inflow of residential and commercial loans across the United States.” said Dean Sioukas CEO of Magilla Loans. The growth is expected to be most significant in the Northwest and Southwest regions of the US.
The key findings of the survey include:
Magilla Loans is a $4 billion lending platform/search engine that connects borrowers looking for residential and/or commercial loans, with lenders at numerous financial institutions including Wells Fargo, Bank of America, Banner Bank, Regions, community banks, and credit unions.
If you believe you might benefit from this change in lender standards, you can begin with a free copy of your credit report once a year at www.annualcreditreport.com/index.action.
The emerging threat of increasing interest rates is a cloud on the horizon. But even this has a bit of a silver lining. FHA borrowers have an advantage over conventional borrowers. FHA loans are assumable. When it comes time to sell, buyers can take over sellers' existing FHA loans instead of taking out new mortgages at whatever the current mortgage rate is at the time. This is especially advantageous in a rising-rate environment.
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Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 10 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. With the Pacific Ocean a couple of miles in the opposite direction.