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Are Lenders Easing Up on Down Payment Requirements?

Posted by Jillian Dohack On April 3

Are Lenders Easing Up on Down Payment Requirements?

It’s true.  I read a few different articles last week that state exactly that.  In the slow recovery of the housing crisis, the mortgage industry is definitely starting to see some great improvements.

Tight credit conditions that have held many potential home buyers back the last few years appear to be thawing just in time for this spring’s market (as reported by CNBC).

Typically the biggest challenge for home buyers is the down payment.  It is being said that home-buyers may now be able to qualify with lower down payments.

This is big news and a huge change from the last four years when 20 percent down payments on a loan were basically required.

I read a recent article “Will Lending Standards Ease at All in 2013?” by Miami Agent Magazine. They state that in the most recent survey of senior lending officers by Moody’s Analytics, lending standards may be easing slowly.

Though 82 percent of loans the past two years have gone to borrowers with the highest credit scores (compared to 50 percent in 2005 and 2006), the survey did show that over the past 18 months, large lenders either loosened or left intact their lending standards on prime mortgage originations.

Is Fannie Mae Easing Up Too?

It has also been reported that Fannie Mae is approving more loans with lower down payments, even buying loans with as little as 3 percent down.

It’s important to mention that these loans require private mortgage insurance. Fannie Mae is also seeing its share of the market rise as FHA, which used to be one of the only agencies to offer low down payment loans.

Loans with between 3 and 10 percent down payments accounted for 18 percent of Fannie Mae’s business for home purchase loans in the third quarter of 2012. Source: ‘Low Down-Payments Are Back as Lenders Ease Rules,” CNBC (March 15,2013)

With the lenders slowly easing up on their credit standards combined with the high demand for credit, Americans are finding that borrowing from banks is starting to become easier, which in turn supports overall spending, contributing positively to the economy.

This is all great news for potential borrowers that are looking to purchase a home in 2013 or 2014 as the demand for homes is slowly but surely growing.

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