Your buyer might be finding it harder to obtain a home loan approval.
The Wall Street Journal has recently reported that mortgage lenders have tightened their standards. 70% of mortgages granted in 2020 went to borrowers who had a credit score of at least 760, which is up 61% in 2019. Mortgage availability went down 35% annually in 2020.
Why are lenders making it harder for potential borrowers?
Forbearance is a major fear lenders have – to receive approval for a mortgage, some borrowers have reportedly signed statements saying they have no intention of requesting forbearance after they are approved for the mortgage.
The Wall Street Journal explains, “The meteoric growth of home prices has made some lenders reluctant to take on first-time home buyers or others they view as slightly risky. Lenders who were comfortable offering mortgages of $300,000 or $320,000 to borrowers with good-but-not-great credit histories might not be willing to lend the $350,000 or more now required to buy the same property.”
How can your buyer up the odds for their lender to approve a loan?
Make sure you insist that your clients begin shopping for lenders as soon as possible. Shopping around from three to four different lenders before even meeting an agent will give your buyer a better idea of what they can borrow.
Understanding and Improving Credit Scores
Here are the scores lenders look at and categorize:
Perfect Credit Score: 850
Excellent Credit Score: 760-849
Good Credit Score: 700-759
Fair Score: 650-699
Low Score: 649 and below
There are ways buyers can help improve and adjust their credit scores. They can request a free credit report once a year from TransUnion, Equifax, and Experian through this website.
Let your buyers know that they can review their credit reports for any errors – if there is an error on one of their accounts, they’ll need to refute the error with the bureau by providing documentation.
Tackling what buyers owe is a major step in improving credit scores – paying on time, and (if they can) paying more than their minimum balance, can help build up that perfect payment history that they need.
For more real estate news and tips, stop by Alliance Title’s Blog.