The economy’s improving but lending standards are not. Nationally, banks are making mortgage approvals harder to come by.
Underwriting guidelines are tightening.
The data comes from the Federal Reserve’s quarterly survey to its member banks. The Fed asks senior bank loan officers around the country to report on “prime” residential mortgage guidelines over the most recent 3 months and whether they’ve tightened.
For the period October-December 2009:
- Roughly 1 in 4 banks said guidelines tightened
- Roughly 3 in 4 banks said guidelines were “basically unchanged”
Just 2 of 53 banks said its guidelines had loosened.
Combine the Fed’s survey with recent underwriting updates from and generally tougher standards for conventional loans and it’s clear that lenders are much more cautious about their loans than they were, say, in 2007.
Today’s Denver home buyers and would-be refinancers face a bevy of new borrowing hurdles including:
- Higher minimum FICO scores
- Larger downpayment requirements for purchases
- Larger equity positions for refinances
- Lower debt-to-income ratios
So, if you’re on the fence about whether now is a good time to buy a home, or make that refi, consider acting sooner rather than later. It doesn’t necessarily matter that mortgage rates are low, or that there’s an up-to-$8,000 home purchase tax credit for households that qualify. With each passing quarter, fewer and fewer applicants are eligible to take advantage.
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Guidelines have tightened up. On a local level, Denver buyers are experiencing this with all types of loans. As a buyer or a seller it’s important to realize that this may require extra time to complete a purchase or a sale. The average 30-day close is currently extended by a week or so.