Proof mortgage lending is tighter than a pair of skinny jeans
If you haven’t shopped for a mortgage in the past six years, you might be surprised at how much harder it is to get a loan these days.
Credit is tighter than a pair of skinny jeans, especially if you have a not-so-hot credit score.
We know this because the Federal Reserve recently asked senior loan officers at about 50 banks how likely they were to give a loan to some typical customers today compared with those same customers in 2006.
A majority of the loan officers -- 43 of 52 -- said they were "somewhat" or "much less" likely to give a borrower with a 620 credit score and a 10% down payment a home loan today than they were in 2006.
Back in 2006, 620 was the minimum credit score for getting a loan at the best rate.
Today, if you’ve got a 620, you’re in the bottom half of the credit class:
- About half of the people who have FICO scores fall between 700 and 850.
- About a third are in the 550-699 range.
- Nearly 15% have scores of 300-549.
If you have a 680 credit score and a 10% down payment, getting a loan used to be a pretty sure thing.
Now, not so much.
About half the bankers said they were "much less" or "somewhat less" likely to make that 680 mortgage than they were in 2006.
Tragically, the report is anonymous, so I can’t share with you the identity of the one banker who said he was more likely to lend to someone with a 680 credit score and a 10% down payment.
Even the 720s among us who have a 10% down payment could find it difficult. About a quarter of the bankers said they were "somewhat less" or "much less" likely to make that loan, too.
HARP program looking good
The survey also asked the bankers if they were going to participate in HARP 2.0, the federal government’s refinance program for homeowners who have faithfully paid on time, even though they owe more than their home is worth.
Just over half the bankers said they’re ready to do the HARP program.
If you’re interested in the HARP program, start with a call to your current lender. Only a third of the banks said they were taking HARP program applications from non-customers.
Happily, most of those participating bankers think they’ll be able to approve 60% or more of their HARP program applications.