What is happening in the Mortgage Market?
by Dennis Martin, Littleton Real Estate Expert.
The overall Denver Colorado mortgage market is currently tightening credit standards, lenders are adjusting their guidelines and qualification standards to protect themselves. Many loan programs and qualifications levels that were available a short time ago and no longer available today.
It all started in early 2007, because of serious delinquencies and poor performance of loans tied to the sub-prime market. In recent weeks, there are reports that delinquencies and performance issues have spread much further than the sub prime market and are impacting future types of loans. For example the Alt-A loans which are no income and asset verification type loans, BELOC loans more commonly called bridge equity lines of credit, second or junior lien products and combination loans such as first and second loans combinations for mortgage insurance avoidance.
What is the Impact?
Lenders have to restrict or eliminate altogether the products previously mentioned. Lenders are requiring larger down payments and higher credit scores. In addition expect lenders to require that loans are fully documented per the under writing condition prior to closing, stricter underwriting guidelines will be followed and greater scrutiny will be placed on appraisals, income reasonability, employment history and compensating factors when making a loan decision.
As a result some customers that may have qualified for a mortgage a few weeks or days ago may no longer qualify today.
It is also important to know that the primary government markets, FANNIE MAE, FREDDIE MAC, FHA, and VA remain relatively unchanged and are still viable options for many buyers.
Loan programs used to offer their best rates to consumers with FICO scores of 720. Now it takes 740, 760 or even 780 to get the best rates the lender has to offer. Many people with “perfect” credit don’t realize that “perfect” credit can be improved — going from a 717 to a 747, for example. This can be done quite easily if you work with a mortgage broker who is a credit expert.