Real Estate News

Mortgages continue to get easier to obtain

Published: 17 Aug 2017

The improving economy has put a lot of would-be homebuyers in a position to get into the market over the past few years, and today's extreme demand for listed homes highlights that effectively. However, it's worth noting that lenders haven't loosened their standards as much as some might expect given the economic recovery over the past few years, and there are plenty of reasons why that might be the case.

In July, the Mortgage Bankers Association's Mortgage Credit Availability Index ticked up 0.3 percent, rising to a reading of 179, the MBA reported. This was driven mostly by increases in credit access for jumbo and conventional mortgages, versus benchmarks of 100 set in early 2012. With this in mind, it's worth noting that mortgage credit access has only risen 79 percent over five-plus years, and that if this measurement existed prior to the economic downturn, those readings would have been several hundred points above the benchmark level.

Nonetheless, credit access has risen slowly but steadily for most of the past several years thanks to economic improvement and, by extension, greater consumer ability to get into the market. Furthermore, rising rates have likely also played a factor in purchase mortgage access, in particular, rising to the levels seen today.

Mortgage credit access continues to improve nationwide.Mortgage credit access continues to improve nationwide.

Potential obstacles
There is, however, some debate as to why lenders haven't made credit more broadly available than they already have, given that the nationwide level of mortgage risk - which title insurance helps protect against - remains near historic lows, according to American Banker. Opinions on the subject are divided between those who think lenders are staying cautious, having learned a valuable lesson about the free and easy credit access they granted prior to the downturn, and observers who believe government regulation of risk is holding back a broader housing recovery.

"It's not the kind of issue that lends itself to crisp, absolute answers, unfortunately," Greg Lyons, a partner at Debevoise and Plimpton, told the publication. "It's a more amorphous and an ideological view as much as anything else. There's not necessarily a right or wrong answer. It depends on what your objectives are."

Consumers play a role
Regardless of the reasons for banks' lingering reluctance to broaden credit more sharply, it may be possible for consumers to boost their qualifications with a few months' worth of work on their credit and financial standings, according to Bankrate. Efforts to ensure all credit-related bills - like credit cards, student loans, and so on - are paid on time and in full can go a long way toward improving a score, as can paying down outstanding balances. In addition, efforts to build a larger down payment - which may take more time - can also help buyers not only improve their chances of having an application approved, but also reduce their loan costs for years to come.

The more consumers and banks can do to come together on these issues, the better off both will be in terms of keeping mortgage risk low while ensuring people have ready access to credit when they need it.