Mortgage Loan Access Improves

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By Gino Blefari, President & CEO, Intero Real Estate Services, Inc.

picture of a key to a houseA couple of great news items landed on the mortgage market in the past week. Federal housing officials have announced that they will leave the GSE loan limits as is, and a new report shows that mortgage loan eligibility continued to increase in the first half of 2013.

What do these two pieces of news mean for borrowers?

Essentially, access to mortgage loans has improved and will likely continue on this path. While borrowers will still have to meet certain standards and requirements to get loans, the process has eased a bit.

What do the GSE loan limits mean?

The GSE loan limits are caps on the loan amounts that can be sold to Fannie Mae and Freddie Mac. Without getting too much into the gory details, these limits are important mostly in high-cost areas where borrowers need to take out larger loans to buy a typical house in their market.

Federal officials have been talking about lowering the limits, which would have the effect of freezing up some liquidity in the market and shutting out some borrowers from getting loans that are sold to Fannie and Freddie.

What about loan eligibility?

In a report from Tennessee-based Quality Mortgage Services, home loan eligibility jumped to 96.4% in the first half of the year from 93.7% in 2012. The report also showed improvements in loan access with average credit scores for loan eligibility dropping from 748 in 2012 to 739 in 2013.

This is good news because it means more borrowers were able to get loans in the first half of the year. Buyers – especially first-time buyers – had been having a hard time in the years directly following the recession. That was partly due to creditworthiness and partly due to a severe tightening of loan requirements.

This new report is great on two levels: it shows loan access has spread a bit, but it didn’t sacrifice quality in the process.

Big changes are expected in the mortgage market next year as refinancings further shrink and the market moves more to the purchase of homes. Many will be watching interest rates like hawks and speculating at every turn that small blips will threaten to derail home sales.

Rising rates indeed are likely, which means more buyers may rush to get in their homes early in the year. But no one knows for sure. And at this point, we don’t expect the increase to significantly throw off the housing market.

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