Listening to the news each day one cannot be unaware that the huge ship of our national economy is struggling to slowly come about. Polls show a renew consumer confidence and investors across the country are taking advantage of this rarified atmosphere of lower prices and historically low interest rates. I don’t think I go a single day, however, without someone saying to me that they know it is hard to get a loan now. When I see the increased purchasing power these rates give us I just stare at them in disbelief and ask them why they think that. Turns out that they are not all wrong! It is a little harder to borrow money today than in a traditional market. Certainly it is harder than at the peak of the insanity standards were being sometimes lowered, sometimes just ignored and other times completely falsified. I still believe most of those were in the minority but certainly, they did occur.
The tightened view under the microscope of institutional lenders has led to vast changes in most institutions. At times these changes were coming so fast that no one internally, let alone externally knew what the “heck” they were doing. Terms, requirements and restrictions changed weekly if not daily. It drove us Realtors nuts as we thought we had a buyer and property perfectly matched, all bank approved ready to close when the whole game plan would change, new documentation required and delays of weeks and sometimes months ensued. This does not lead to a smooth home ownership transition. When it is basically my job, as a Realtor to help make this transition as seamless and unstressful as I can my job became not unlike that of a circus master. The only difference was that I never had any idea what was coming next in the center ring but I had to help people prepare for it. The money was there. It was always there. It is just that the game plans changed so fast that no one could keep up with it. I talked to more than one mortgage lender who confessed that he thought that the rates were so low that the institutions wanted to make it difficult just so they didn’t have that many loans out there for the next ten to thirty years at these unheard of rates. I have never seen any real evidence for this but it makes a rather compelling theory.
Today however, according to Capitol Economics there is evidence that these credit requirements are loosening also. It still takes an average 700 credit score to get a great loan but that will probably loosen up. The changes that can be seen in ratios of buyer earnings. “Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings. “ “Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”
In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV. “ For more read this article from DS News.com