Boston North Shore mortgage experts say 2016 may bring greater borrowing opportunities for homebuyers. Although you still have to qualify for the amount you want to borrow, more lenders are reporting a loosening of credit standards. Fannie Mae says loan underwriting is expected to ease in the near future. Let’s examine why this may be the case and what the effect may be.
Boston North Shore Mortgage Industry to Aid Housing
Relaxed credit requirements will likely help the housing market. Tight credit standards and a short supply of affordable homes for sale have been cited as reasons for the housing market’s slow recovery. In a recent survey of Fannie Mae lenders, 16% said they expect a relaxation of credit standards in 2016. Lenders expecting a tightening of standards dropped to 2%. The survey was conducted by Fannie Mae and represented a cross-section of nearly 200 lending institutions.
While credit may improve, affordability for first-time home buyers will remain a challenge. With the number of starter homes on the market, home price appreciation is still higher than growth in household income. However, the easing of credit standards should provide some assistance to offset affordability.
As the prospect of rising interest rates looms in 2016, many lenders expect more competition. This may persuade them to ease some of the lending safeguards added after the last housing crash. Fannie Mae, Freddie Mac and the FHA have all worked to clarify lender liabilities for bad loans. They have been pushing hard for lenders to ease their credit practices to help the housing market recover.
In addition, Fannie Mae recently announced a new credit scoring program. Dubbed “trended data,” the scoring model shows a broader review of the credit history of borrowers. That should improve the credit scores of some home purchasers. According to a recent study by TransUnion, trended data would increase the percentage of borrowers in the “super prime risk” tier from 12% to 21%. Those borrowers would get better access to new mortgage loans at the best rates.
Despite the potential relaxation in credit standards, a recent survey by the National Association of Realtors revealed roughly 66% of consumers perceive mortgages as “somewhat difficult” or “very difficult” to obtain in today’s market.
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