Mortgage Lenders are Readjusting Standards

As more loans across the country default and home prices drop, the mortgage industry has had to modify their standards and requirements.

These lenders, who were criticized for requirements in past years being way too lenient, are raising the bar for homeowners in search of loans. Higher credit scores, smaller loans, down payments and detailed proof of income and assets are now the new norm.

Even in early 2007, customers with credit scores in the low 600s could obtain a mortgage with no down payment. Today a credit score of below 680 might subject you to higher rates and special fees.

Lenders have also drastically reduced their loan-to-value (LTV) ratios. This ratio measures the amount a customer borrows in comparison to the total value of the property. Traditionally these ratios never exceeded 80 percent, but during the peak of the market, some borrowers were taking out loans worth more than their home purchase price.

Today, many home buyers are often expected to provide a down payment, or face fees and much higher interest rates.

If you are in the market to buy a home, we suggest talking to lender and seeing what options are available that fit your circumstances. Getting a preapproval letter from your lender is always your best bet in starting the home searching process, and will give you and your Buyer Specialist a broader picture of your position.