Lately, there’s been a lot of talk about how credit will be getting tighter and more difficult for almost all borrowers and would-be home owners. Interest rates going up plus a tightening of requirements may have made you feel like you just can’t afford a mortgage right now. You could be completely wrong. In fact, borrowers today could have an easier time qualifying for a mortgage than one year ago. The average credit score needed for approved mortgages dropped to 727 this winter. One year ago it was 748. This winter, almost 31% of all loans were made to people with credit scores below 700.
Also encouraging is that the debt-to-income ratio limit is slightly higher: it was 35 in June 2013, but now in winter 2014 it is at around 39%. Why have these numbers changed? Well, it’s likely that rising interest rates and rising home prices naturally make a debt to income ratio higher than a year ago when home values and interest rates were lower. Lenders are also more comfortable letting go of the stringent requirements they adopted in 2008. lenders are trying to stay competitive and are trying to encourage home purchases despite the recent rise in rates and home prices. Lenders still have tight qualification standards, but they are letting loose just enough so that people can breathe a bit easier if they are trying to qualify for a mortgage.
