If you’ve been putting off purchasing a home because you believe it will be too difficult to get approved, know that although lending standards are still high, qualifying for a mortgage is becoming somewhat more manageable.
More opportunities are becoming available to those who are prepared to move forward as a result of lenders making it marginally simpler for qualified buyers to obtain financing.
Therefore, this change might be the chance you’ve been waiting for if stringent requirements were preventing you from taking the same risks with loans that caused the 2008 housing crisis.
Lenders Are Opening More Doors
In an attempt to increase activity in the housing market, banks are extending credit to more people, including those with lower credit scores or smaller down payments. This implies that more people are receiving mortgage approvals.
However, that does not imply that we will experience another crash like the one in 2008. Lending standards are still far stricter now than they were in the past, despite the recent easing.
There has been an increase in the Mortgage Credit Availability Index (MCAI), according to the Mortgage Bankers Association (MBA). This index indicates the ease or difficulty of obtaining a mortgage.
An increase in the index indicates that banks are loosening their lending requirements. Additionally, as shown in the graph below, credit availability reached its highest point in nearly three years in May:
Why are you concerned about this? It implies that you might now be eligible for a mortgage that you wouldn’t have been able to get only a few months ago. According to the National Association of Underwriters (NAMU):
The availability of mortgage credit increased dramatically in May, hitting its highest level since August 2022. The increase shows that lenders are becoming more open to lowering underwriting requirements, giving borrowers more financing choices.
But What About 2008?
“Didn’t looser lending standards play a role in the 2008 housing crash?” is what you may be asking yourself now. That’s a wise and significant question. Here’s the distinction, though. Although credit is becoming more widely available, lending standards remain stable.
Lending levels today are still far lower than they were prior to the housing bubble, according to MCAI data dating back to 2004 (see graph below):
Therefore, expanding the availability of mortgage credit at this time is not a concern. Simply put, it’s advantageous for anyone wishing to purchase a home. As recently stated by Brett Hively, SVP of Mortgage, Finance, and Strategy at Ameris Bancorp:
“Many borrowers are now able to proceed with a home purchase or refinance program as a result of this increase.”
Bottom Line
Therefore, it’s worthwhile to find out what’s feasible today if you’ve been putting off getting a mortgage because you believed you couldn’t get approved. To determine whether you’re prepared to take the next step toward homeownership, discuss your options with a lender.