Getting a mortgage just got easier

After the housing crisis, mortgage lending standards became unreasonably strict for many. In 2014, only 51% of refi requests were successful, according to mortgage software company Ellie Mae, and one that did not gain notoriety: that year, Ben Bernanke said he was turned down when he attempted to refinance his Washington, DC, home mortgage shortly after resigning as chairman of the Federal Reserve. While he didn’t say why, one theory was that his income after the Fed as a consultant was spotty.

Today, 66% of refis are approved, and this is not the only good sign for borrowers looking for a regular mortgage, that is, a fixed or adjustable rate loan of 20 % Guaranteed by Fannie Mae Government Sponsored Agencies. or Freddie Mac. As shown in the graph below, the average FICO credit score on a 30-year loan to buy a home has fallen from a high of 765 in 2010 to 755 recently, reports real estate data company CoreLogic. Borrowers with an average score of 695 might be able to get a compliant mortgage (loans under $ 417,000 in most countries) for the first time in years, says Trulia’s chief economist, Ralph McLaughlin.

Get out of the bubble

The best rates are always reserved for borrowers with a score above 800. The good news is that the difference between the rate you will get with a great score of 800 and what you will get with a great score between 750 and 800s. ‘is reduced to almost zero, says McLaughlin. “The big gap is between people in the 750 lineup and those in the 700 and 600,” he says. With lower credit, you could pay almost a quarter of a point more. On a $ 200,000 mortgage, that’s $ 10,000 more over the 30-year term of the loan.

While you should be able to get a maximum rate with a credit score of 740, lenders do not meet uniform thresholds. This score could put you in the same category as borrowers of 700 to 750 in one bank, but 740 to 800 in another. The more quotes you get, the more likely you are to get the best possible rate.

Revisit your refi

Banks have become even more relaxed when it comes to refinancing. Once you have a history of paying off your mortgage, banks usually assume that you will pay it off in the future.

Even if you’ve already hit the refi table, say when rates fell well below 5% in 2010, come back. The Federal Reserve raised short-term interest rates in December, raising concerns about rising consumer lending rates, and it could do so again in June. But mortgages generally follow the rates on 10-year Treasury bonds. Investors, worried about the long-term outlook for the economy, grabbed hold of these bonds, pushing prices up and rates down. The result: The average rate on a 30-year mortgage is 3.9%, lower than at almost any time since early 2013. But with the Fed still committed to raising rates in 2016, that low rate will eventually. to augment. Don’t hang around.

Calculator: Should I refinance my mortgage?

One way to profit now: switch from a 30-year loan to a 15-year loan. If you last refinanced in 2010, your rate is probably around 4.7%, the average for that year. On a mortgage of $ 200,000, that monthly bill is $ 1,036. By swapping your mortgage for a 15-year loan, you should be able to lock in 3.1%. This will bring your payment to $ 1,229, but allow you to withdraw the loan almost a decade earlier and save $ 77,000 in interest.

Let yourself go big

In some high-cost areas, house prices have risen: Median house prices in San Jose have doubled their lows from the housing crisis. Prices increased 60% in Seattle and 45% in Washington, DC This can be a problem. Loans over $ 625,500 in high cost areas and $ 417,000 in the rest of the country do not qualify for Fannie or Freddie guarantees, making them more difficult to obtain.

While overall caps have not changed for more than a decade, limits in 39 counties across the country, including areas near Boston and Seattle, were raised last year. If your home did not qualify for an eligible loan for Fannie and Freddie before, check again. (For county boundaries, go to the data section of fhfa.gov.)

In addition, banks are beginning to be sensitive to customers who need these larger loans, called jumbos, although they are still cautious when it comes to credit. The average FICO score on a jumbo loan is 770 for purchases and slightly lower for refinances. But if you can meet those criteria, you’ll pay a rate of just 3.8%.

Read more : How to master buying a mortgage online

Finally, there is a giant option to be wary of. You may be offered an interest-only loan, which is initially more affordable because you don’t pay the principal until years later. Stay away: “These were one of the commodities that led to the economic downturn,” says Tim Manni of HSH. “Now we’re starting to see them surface. It’s a risky business.”


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