Mortgage News in the Carolinas
Posts tagged Senior Loan Officer Survey
After A Pause, Mortgage Guidelines Resume Tightening
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Mortgage guidelines appear to be tightening with the nation’s largest banks.
In its quarterly survey to senior loan officers nationwide, the Federal Reserve uncovered that a small, but growing, portion of its member banks is making mortgage approvals more scarce for “prime” borrowers.
A prime borrower is described as one with a well-documented payment history, high credit scores, and a low monthly debt-to-income ratio.
Of the 53 responding “big banks”, 3 reported that mortgage guidelines “tightened somewhat” last quarter. This is a tick higher as compared to prior quarters in which only 2 banks did.
46 banks reported guidelines unchanged from Q1 2011.
When mortgage guidelines tighten, it adds new hurdles for would-be home buyers in Charlotte. Tighter lending standards means fewer approvals, and that can retard home sales across a region.
Just don’t confuse “tighter standards” with “oppressive standards”.
While it is more difficult to get approved for a purchase home loan in 2011 as compared to 2006, the same basic rules apply:
- Show that you have a history of paying your bills on time
- Show that your income is sufficient to cover your obligations
- Show that you can make a downpayment
And the good news is that, once approved, you’ll benefit from some of lowest mortgage rates in history.
Last week, the average 30-year fixed mortgage was below 4.250% for buyers willing to pay points, and the average 5-year ARM was below 3.000%. The 15-year fixed rate loan was similarly low.
For as long as delinquency rates remain high, expect mortgage guidelines to continue to tighten through the rest of 2011 and into 2012. Therefore, if you’re a “fringe” borrower looking at a purchase in the fall or winter season, consider moving up your time frame. Changing guidelines may render you ineligible for a mortgage.
1 In 8 Banks Tightened Prime Mortgage Standards Last Quarter
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The Federal Reserve says that financial markets “remain supportive of economic growth“. Residential mortgage guidelines, however, continue to tighten.
If you’ve applied for a home loan recently, you probably felt it; extra scrutiny on income, assets and credit scores, among other things. The hard proof of the changes, however, can be found in the Federal Reserve’s quarterly survey of its member banks.
Every 3 months, the Federal Reserve asks senior bank loan officers around the country whether their respective banks’ “prime” residential mortgage guidelines tightened since the last survey.
For the period January-March 2010, 1 in 8 banks surveyed toughened their qualification standards.
Only 4% loosened them.
When we account for the Fed’s survey in conjunction with new underwriting standards from Fannie Mae and FHA, it’s clear that getting approved for a mortgage in 2010 is more difficult than at any time in recent memory.
Today’s homeowners and home buyers in Charlotte have taller hurdles to leap:
- Minimum FICO scores are higher
- Downpayment/equity requirements are larger
- Debt-to-Income thresholds are smaller
In other words, mortgage rates may stay low throughout 2010, but that won’t matter to homeowners failing to meet the new, minimum eligibility standards as set forth by the lenders.
If you’re among the many people wondering if now is the right time to buy or refinance a home, remember that — along with a probable increase in mortgage rates — mortgage approvals are getting more scarce.
The best home price or mortgage rate in the world won’t matter if you’re ineligible for financing.
