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 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.
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