Restrictions Are Being Eased
One of the reasons why so many home loans are being written is that restrictions are being eased both on a federal level and by lenders themselves. While some banks do set their own policies, make their own rules as it were, they usually follow standards and guidelines established by the federal government agencies such as the FHA, USDA, VA and of course by Freddie Mac and Fannie Mae.
Even so, banks often find those guidelines to be a bit restrictive so they write their own standards in what is called an “investor overlay.” This is where the lender’s own guidelines differ from those established by the government and these are actually the official guidelines the lender uses to make their decision. One example would be the minimum credit score required by Fannie Mae which is typically around 500. If a bank so chooses they can lower that number to 480 which would then qualify a person for a home mortgage loan with a score of 490.
How Lenders Advertise Softer Guidelines
If you hear a bank saying they are relaxing their overlay, this is exactly what they are referring to. They are probably making things easier for potential borrowers in a number of ways. Not only is that credit score going to be a bit less important but so are other qualifiers as well. Documentation on self-employment is going to be a bit easier to provide as are such things as having been denied a mortgage within the past couple years because those guidelines that kept you from getting a loan are now easier.
Some Guidelines Need to Remain Intact
While there are some guidelines that are being relaxed, others cannot be changed because of the type of mortgage loan being issued. A VA loan for example is one that is only available to veterans who served in the military and that will not change. However, veterans already have benefits which other borrowers don’t get such as the fact that a VA loan does not need to carry mortgage insurance and this loan doesn’t need a down payment as this loan is financed 100 percent.
A Look at What Fannie Mae Is Reporting
Then there is Fannie Mae, one of the two government loan processing entities that reports an amazing 77 percent of loans being closed. It has been a very long time since those numbers have been realized and why there is no doubt about the fact that loans are simply easier to get. Also, FHA government backed loans are being written in greater numbers and the down payment required here is as low as 3.5 percent, an extremely low amount totally unheard of with any other kind of loan.
With Mortgages Easier to Get – 2017 Promises to Be a Very Good Year
With mortgages easier to get approved for, analysts are saying that 2017 may be a record setting year in residential real estate, unlike any seen since the downturn in the economy in 2009. It has been a long time in coming and although the economy has been steadily improving, lenders have been unwilling to loosen some of their policies simply because of what happened at the end of the last decade. They had been afraid to witness a repeat of that horrific time when the bottom literally dropped out of the economy here and abroad.
With home mortgage loans easier to be approved for and an economy that continues to get stronger, analysts predict another record setting year in 2017. Many believe that it is actually a good thing that standards are easing a bit because prices are on the rise. It’s truly a seller’s market and that means that buyers will be held to the asking price in most cases but with the availability of mortgage loans, everyone’s a winner.
Home Mortgage Loans Are Being Approved in Record Numbers - Financialbuzz.com
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