I frequently hear people say how it's impossible to get a mortgage these days. I have heard comments that you need 20% down or more, plus you need a credit score over 750 or you just can't buy. That information is not accurate at all! I will agree it is more difficult than it used to be, but it is not impossible!!
Borrowers are being asked to provide more documentation than they used to need. We need to be able to verify your income and assets, we need to know that you will be able to pay back the mortgage that you take out. Underwriters are looking at appraisals more thoroughly than they used to. We need to document any large deposits in your bank account.
Part of the reason underwriting guidelines are more strict is to make up for the loose guidelines during the subprime era. The other reason is 'buybacks'. Fannie Mae and Freddie Mac are pushing back loans to banks that aren't performing (payments aren't being made on time). The banks are then trying to get the originating lender to buy back the loan. In order for a lender to avoid buying back a loan, they need to show the loan package was complete and a strong file. The more documentation in the file, the stronger the loan. Lenders are now looking at the future and using the information that they can get to show that you will make your payments in the future.
Many banks are being very picky over any loans that they refinance and taking only the best loans they can find. They may not be willing to refinance some FHA refi's or HARP loans that have mortgage insurance or a high loan to value. If you have run into that issue, check with another lender – you may find another mortgage banker that will help you.
As we continue to see stricter underwriting guidelines, we will see less buybacks from Fannie and Freddie. As that happens, we may see some of the underwriting guidelines loosen up slightly. For now, know that you will be asked for more documentation than you were in the past. But you can buy a home with less than 20% down and you do not need a 750 credit score!!!
Leslie Vanderwerf, NMLS ID#335509, Summit Mortgage - Email – Website
