Poorly documented mortgages were key players in the housing
crash of 2006 and 2007. Many of those mortgages should not have been approved
and led to four million foreclosures, devastating families and lowering value
by over 50 percent in some communities. Since then, the loaning protocols have
seen drastically increasing standards for credit, abilities to repay and better
documentation. The Equifax Finance Blog explores how this can affect you in the
new article, "Buying a Home? Mortgage Standards You’ll Need to Consider."
These changes threw the market for a loop - many who could
once qualify for a mortgage could no longer do so. Approximately 40 percent of
residential loans went to homebuyers with credit scores over 740.
According to Economists at the National Association of Realtors, 500,000 to
700,000 home sales could be made if credit conditions would return to the prior
levels. These statistics serve as reason for many who believe the new standards
have been set too high.
If you are seeking to purchase a mortgage or refinance a
home, there are various standards you must first meet. An average FICO score is
resting at 745, a loan to value ratio (LTV) of 80 percent and a debt to income
ratio (DTI) of 35 percent with mortgage and 23 percent with prospect. Also, the
QRM rule will stress that lenders make loans to borrowers who put down more (10
percent plus), and for those who put down less to pay higher mortgage interest.
The changes being made have led mortgage approval rates to rise 20 percent, and
causing homebuyers to be doing better.
To learn more about mortgage standards and credit ratings,
visit the Equifax Finance Blog.
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