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Last updated on December 5th, 2022 at 10:05 pm
During the pandemic, the lending standards were tight, but now it is getting easier for homebuyers to get a mortgage loan as lenders are starting to loosen the reins a bit.
According to the Mortgage Bankers Association, in April mortgages were about 2.2% easier to come compared to March.
And mortgage availability on some types of loans was up to 12.6%.
2020 was a risky time for lenders to loan out money because unemployment hit record-breaking levels, and many people lost jobs and wages, and for months entire sections of the economy were shut down.
Many mortgage lenders raised loan requirements to protect themselves from the risk of default.
Certain loan programs like FHA loans, HELOCs, and non-QM loans were not even being offered.
At this time the lenders required higher credit scores and larger down payments.
Usually, a conventional mortgage was available with a credit score of 620 and only a 3% down payment but during the COVID-19 times, Chase raised its credit score requirement of 700 and down payment 20% on all their purchase loans.
Few lenders added a second employment verification as a qualifying clause.
According to MBA’s, Mortgage Credit Availability Index, those high standards are easing up now. This got indicated when the MCAI increased by 2.2% in April.
Credit score, down payment, and other criteria standards dropped the most on conforming loans, with an increase of 12.6%.
Freddie Mac and Fannie Mae set qualifying criteria for conforming loans.
Though the government-backed agencies allow credit scores from 620 and down payments of 3-5% or higher, the lenders are allowed to set their own, requirements.
The qualifying criteria for jumbo loans also increased by 7%. The MCAI for Government loans programs only increased by 0.1% from March to April, indicating lending standards are largely holding steady.
The mortgage credit availability is improving, allowing many Americans to now buy a house or refinance.
Pre pandemic the mortgage credit index was well into the 170s and 180s but now it’s just 128.1.
When the economy picks up and when fewer mortgage loans are in forbearance credit availability will improve.
As the standards will ease up in the coming years, don’t lose hope if you don’t qualify for a home loan today.
Reference Source: The Mortgage Reports
