Posted on 10/02/2012 11:21:45 AM PDT by illiac
Mortgage rates continue to hit new lows, but the ultra-low rates are out of reach for many would-be borrowers who can’t meet strict underwriting standards. And new national data suggests that underwriting standards for getting a loan are getting even stricter, too.
FICO credit scores on all new loans closed in August averaged 750. That is nine points higher than one year ago, according to a survey of about 2 million mortgages by Ellie Mae Inc., a mortgage technology firm used by many lenders. For home owners who refinanced in August, the average FICO score was 769—even higher—at Fannie Mae and Freddie Mac. That is up six points from last August. According to Fannie Mae and Freddie Mac, for home purchasers the average credit score was 763.
The developer of FICO scores, Fair Isaac Co., finds that 78.5 percent of all consumers have scores that fall between 300 and 749. “Barely one in five, in other words, scores high enough to meet today’s FICO score averages at Fannie and Freddie,” The Washington Post reports.
(Excerpt) Read more at realtormag.realtor.org ...
Not to cause waves here, but the problem we are having in our area is that the market is improving and the realtors are listing and selling at higher offers than they market can support. Appraisers are still required to utilize sales with the past 6 months (as a general rule - some lenders will allow 12 months), and those older sales are still showing decreased prices. The market needs to keep recovering for the older sales to drop off to support higher appraised values.
The lenders who will let appraisers go back for more than six months are just compounding the whole mess - HUD is one of them.
Now comes the problem of high FICO scores being required, which severely limits the amount of sales available.
I was at a housing conference last week and there was a mortgage originators panel that discussed this topic. The bank standards are above and beyond those layed out by FHA, Fannie & Freddie. They are called “credit overlays” and it’s due to the banks being scarred by the financial crisis as well as Dodd-Frank and Basel III regulations and they are just unwilling to take on risk. Couple that with FHA and FHFA in disputes as to what is and is not a “Qualified Mortgage” and they are just trying to limit the risk on their side.
I think it’s something different. Our massive government debt gets paid off by high inflation and low interest rates. The only way this works is if there is a way to keep most people from borrowing money at low rates while hiding inflation with fudged numbers on the CPI. In the meantime, the government gets cheap money and inflates its way out of debt. In the meantime, savers and lenders are effectively being taxed due to the differential between the two. The inflation/low interest combo is a massive transfer of wealth from those who are lenders and own currency to those who own real inflationary property and have debt.
I think long-term loaning money (without overextending) to buy real inflationary property is going to be the best investment because that is what the government has to have to get itself out the hole it’s in.
My nephew has a good job, but 640 FICO and a wife with bad credit; debt/spending is par with his income, IOW he has no savings. He had to have his mother give him $10K for down and closing. He has been pre-approved on his 640 alone for a $135K house with 3% down and 3.85% on 30 yr fixed
3 years ago I refinanced to get 4.85% 30 yr fixed and had to have 20% equity and the wife and I both are over 800 FICO.
What the hell is going on?
next time be transgendered,too. Bonus points ;)
I do this for a living. If you have been independent at this for at least 2 years, and show a profit on your taxes; you should be ok.
If you are self employed less than 2 years; but have been a doctor long term; it should still work.
We usually really like doctors as they have pretty stable income.
"Bot"? Don't you mean "bought"?
I have a Conventional (14 years left on a 30 year) at 7.375. I have about $85,000 in equity on a home valued at around $140,000. Because of trying to expand our business several years ago, we have some hits on our credit. I’d love to re-fi and just lower out payments, but there is no way any lender would do it. We are barely scraping by. If only I were “poor” I’m sure Obama would help me. S/
I know this from experience I sell homes for a living and it is so bad right now but on the other hand so good. Low interest rates, lowest in 50+ years and incredible buys out there, it has really picked up this year in my area, southern Oregon, we are all very busy.
My husband is American Indian, but we’ve always met our credits needs as white people.
exactly. It’s good that lenders are being strict now instead of creating a new bubble
Credit worthiness is a complicated calculation and different banks have different calculations
I did not realize the “Contractor” issue went so far up the financial food chain.
My company has a large Temp work force, many of them quite well paid, and many others who have been with us for as long as 5 years (48 weeks on, 8 week layoff).
I've talked to 4 different people who have tried - and failed - to re-fi or purchase.
All 4 were trying to finance with guarantees from the VA or FHA.
In their cases it's the federal government that stops the transaction, not the banks.
As soon as the Feds hear the word “Temp,” it's “Sorry, no guarantee.”
The FED and the Federal government are trying to prop up housing values by any means possible.
The FHA loan is the new sub-prime. The FHA backs about 25% of all new home loans. It was under 5% before the housing bust. According to Dr. Housing Bubble, about 1 in 6 of these loans are in some form of delinquency.
From the information you have given, it appears your nephew and NIL are likely going to be another statistic. It really comes down to whether they are buying too much house. If they are still living pay check to pay check after buying, they probably shouldn't.
I changed jobs in Jan and so thats the problem.
I’ve got a list of the banks that have turned me down, and
can’t wait till they try to get me to bank with them in the future. I still won’t shop at Sears after they refused me credit when I was a medical student ( with an income and a working wife).
“My husband is American Indian, but we’ve always met our credits needs as white people.”
Oh, I have an 800+ FICO and no debt but a house that is 1/3 my annual income.
I just say I am black to do my part to screw up the statistics.
The real reason they are being super-strict is they expect us to enter into an inflationary period making fix-rate loans money losers.
LOL!
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