Have you heard of the mortgage policy changes that occurred in mid-2016 that is instrumental in the increase of loan applicants being approved? Policy changes have increased the number of loan applicants that have been approved for mortgage loans. These changes include a drop in the required credit scores and increases in both the accepted debt-to-income ratio and the availability of low down-payment loans. These changes may affect mortgage rates in Syracuse NY. Let’s look at how these changes increase your chances of receiving a mortgage loan approval.
Low Down-Payment Mortgage Loans
Once nonexistent or hard to find, mortgage loans with low down payments ranging from 0 to 3.5 percent are now available. The standard minimum down payment of $17% to 20% is no longer the only type of mortgage loan offered.
Some low-down payment loans require the mortgage insurance payments that are currently paid on FHA loans. These premiums protect the lender if the borrower defaults on the loan. Loans that do not require mortgage insurance may usually charge high interest rates.
Down-Payment Assistance Programs(DPA)
The DPA program issues grants which help buyers pay their down payment on the house or their closing costs. This significantly reduces your closing costs by 5% of the loan amount. This grant does not need to be repaid. DPA has grant levels that associate with affordable interest rates. Mortgage loan options that are available includes: FHA, VA, USDA, and Conventional. First-time buyers are also eligible to participate.
Lower credit scores now accepted
Many buyers who once did not qualify for a mortgage loan because of low credit score may now qualify. Qualifying credit scores have declined from the 720 or higher rule. According to Credit Sesame, potential buyers with credit scores of 600 or more may now qualify for a mortgage loan.
Loan applicants with good and fair credit scores are now considered good candidates. Loan applicants with a 613-credit score will not get approved for a mortgage loan. A 649-credit score will qualify the loan applicant for an FHA loan. A 682-credit score will qualify the applicant for a conventional mortgage loan.
Credit score ranges and their association with the rating of the score:
• Excellent – 720 or more
• Good – 640 to 719
• Fair – 550 to 639
• Poor – 500-549
• Very Poor – 499 or lower
Applicants with higher debt-to-income ratio percentages are now approved
The debt-to-income ratio is the percentage of the amount of monthly expenses to your monthly income. According to the LA Times, borrows who have a debt-to-income debt of 45% and less, must have a credit score no less than 680 and their earnings must be less than the U.S median income to qualify for a mortgage loan. According to the Washington Post, if the borrower has a loan application that shows a strong ability to repay the loan, an applicant with debt-to-income ratios of 55% may now qualify for a loan.
More loan applicants are now being approved for mortgage loans because the required high credit score requirements met a couple of years ago are now decreased. Down Payment Assistance programs qualify buyers who need help making the down payment or the closing costs. More applicants are being approval because more loans with low down payments are available. An applicant who has a debt-to-income ratio of 55% can be approved if their applications show strong and serious repayment strength. Due to easing of mortgage approval requirements more buyers are now eligible to qualify for mortgage loans.