Tighter Credit Standards
According to the FNMA Mortgage Lender Sentiment Study for the second quarter of 2020, 52% of participants said during the past three months, they have tightened credit standards for mortgages that can be purchased by government sponsored enterprises, GSE, like Fannie Mae and Freddie Mac. 64% reported they had also tightened standards for non-GSE eligible mortgages.
61% had tightened standards for government-backed mortgages such as FHA, VA, and USDA loans. While these programs have minimum standards set for the borrower, lenders can impose stricter requirements for them to specifically make the loan.
As reported in the second quarter 2020 survey “After years of stability, this quarter, the majority of lenders reported tightening credit standards. Across all loan types, the net share of lenders reporting easing credit standards for both the prior three months and the next three months significantly decreased, reaching survey lows.”
It is expected that lenders will continue to tighten standards for the third quarter. The reasons precipitating these changes included concern over COVID-19 related factors including home price uncertainty, higher unemployment, policy changes and lower inventory.
It is more important than ever for borrowers to be pre-approved prior to beginning the process looking for homes. This valuable step can save time, effort, and money. Your real estate professional, Michele Chiles-Hickman, can recommend a trusted mortgage professional who can give you the answers you need.