As a sign of mortgage lenders’ rising confidence
in the housing market, restrictive lending standards are beginning to ease, and
the credit freeze is starting to thaw.
Lenders have started to accept lower credit scores and to reduce down-payment
requirements.
Making sense
of the story
·
Lenders recognize that
refinancing old mortgages will no longer be a huge profit center for banks, so
competing for borrowers will be needed for business and future profits. As a
result, lenders will have to open up to borrowers who may not have perfect
credit or large down payments.
·
For
example, the lender TD Bank began accepting down payments as low as 3 percent
through an initiative called "Right Step" for first-time buyers. A
year ago, the program required at least a 5 percent down payment.
·
Mortgage
originations are expected to reach $1.1 trillion this year, which is down from $1.8
trillion last year and $2 trillion in 2012 due to less refinancing.
·
While
private lenders have shied away from low-down-payment mortgages in the past few
years, in the past year, more than one in six loans made outside of the FHA
included down payments of less than 10 percent.
·
Credit scores for borrowers seeking conventional
mortgages also are easing, as scores on purchase mortgages stood at 755 in
March, down from 761 a year earlier.
·
Smaller
lenders are trying to appeal to first-time buyers while many larger lenders are
gradually reducing down payments for jumbo loans in order to attract wealthy
customers.
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the full storyhttp://online.wsj.com/news/articles/SB10001424052702304626304579509463522046346
Source: Wall Street Journal
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