This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

If You Thought a Mortgage Was Impossible, Try It Now

NEW YORK ( TheStreet) -- After years of saying no to millions, mortgage lenders are loosening up, making it easier for people with less than perfect credit to get loans. Too bad not so many people are in the market.

The two facts are related, since lenders get hungrier when they don't have enough applicants. And both features arise from the market's changes as the financial crisis recedes into the past.

What's it add up to? Well, if you've been sitting on the sidelines reluctant to buy a home or refinance out of fear of rejection, it's time to get your loan application in. Not only are approval standards loosening, but mortgage rates could be higher in coming months.

Last week the Mortgage Bankers Association reported that its Mortgage Credit Availability Index had gone up for the fifth straight month, gaining 2.2% in June to 112.3. A higher score, based on lender requirements for credit score, loan-to-value ratios and other factors, means loans are easier to get.

The index was set at 100 in March 2012. If it had been around in 2007, when the only real loan requirement was signing your name, it would have been set at 800. So lenders are a little less hyper-cautious than they've been, though not throwing money to the winds.

Why the loosening? For one thing, lenders probably realize they got more conservative than they had to, denying themselves profits from perfectly sound applicants. Also, rates have eased for loan payment delinquencies, foreclosures and other signs of trouble.

Next, home prices have been rising at robust levels in much of the country, especially in some of the markets that were hit hardest by the housing collapse. Rising prices and growing demand from buyers allow a borrower who does get into trouble to get out by selling the homes, using the proceeds to pay off the loans. So if a lender approves a mortgage for someone it shouldn't, it may all turn out OK anyway.

Finally, there's that hunger factor. Because rates are rising, the number of mortgage refinancing applications has plummeted over the past year, as many homeowners can't save enough to justify the refinancing costs. Although home sales have picked up, that hasn't been enough to offset the decline in refinancing.

So lenders are searching for customers, and they have more time to handle trickier applications, such as those from people who are self-employed.

Applicants with very low credit scores, recent bankruptcies or foreclosures, or who are behind on debt payments, are still likely to be denied. But a few dents and scratches on your record might not be the deal killers they would have been a year or two ago.

The first step for a prospective applicant is to check the credit history and correct any mistakes. Make sure you are up to date on all bills and loan payments, and gather all materials you'll need to show your income is big enough and dependable enough to support a loan.

Also, put together some cash. With a bigger down payment you have a better chance of being approved, since a smaller loan relative to the home's value makes it easier for the lender to come out whole in a foreclosure. And be sure to shop around, as some lenders will be more lenient than others.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $118.48 0.57%
FB $104.25 -1.10%
GOOG $743.96 -0.84%
TSLA $230.35 -0.54%
YHOO $33.81 2.60%


Chart of I:DJI
DOW 17,719.92 -78.57 -0.44%
S&P 500 2,080.41 -9.70 -0.46%
NASDAQ 5,108.6660 -18.8590 -0.37%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs