Whether you’re looking to purchase your first home or refinance, it’s an excellent time to be in the market as lenders are making it easier to get approved for a mortgage.
For eleven consecutive quarters, more lenders have loosened their lending standards than the number of lenders who have made their loan terms more stringent.
These factors are helping people get approved for a mortgage
Banks are gaining confidence as homes continue to appreciate and the market recovers from the 2008 housing crisis. Lenders have also developed improved lending models and are finding solutions for people with mediocre credit scores.
Even homeowners with little or no equity in their properties are finding favorable terms that allow them to refinance – something that hasn’t been nearly as easy to do until recently.
Prime residential mortgage loans are hot
The Federal Reserve defines these loans as being for people with a 740 credit score or better, a below average debt-to-income ratio and terms that are similar to the amortization schedule of an adjustable-rate or fixed-rate loan.
The Federal Reserve reported that 3.2% of banks made lending standards for prime residential mortgages more lenient last quarter, helping more consumers get loan approvals.
FHA loans are also popular
Government-backed loans like those insured by the Federal Housing Authority are also helping consumers get approved for a mortgage. According to the Federal Reserve’s last quarterly Senior Loan Officer survey, 100% of banks are maintaining easy standards for obtaining an FHA loan.
These loans are especially helpful to first-time homebuyers as they only require a 3.5% down payment and lower credit standards compared to other types of loans. Fortunately, FHA loans are a viable option for most loan applicants.
Putting it all together
Between these favorable lending standards and interest rates that are still near historic lows, now is a great time to enter the housing market. If the Federal Reserve decides to boost key interest rates again and homes continue to appreciate as expected, these prime conditions for homebuyers could quickly fade away.