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Mortgages: Easier to come by today?

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Posted On: 11/18/2015

QUESTION:

Is it easier to get a mortgage today? I hear all kinds of scary stories and would simply like a straight answer.

ANSWER:

You’ve come to the right place. Let’s look at some numbers.

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Interest rates for much of the year have been around 4 percent. That compares with an average of 4.17 percent in 2014, 3.98 percent in 2013 and 3.66 percent in 2012. Plainly, today’s rates are not as good as 2012, but consider two points: First, rates in 2012 reached their lowest levels in 65 years. While rates today are higher they are not insanely higher. Second, 4 percent is less than half the 8.6 percent rate paid by most mortgage borrowers during the past 40 years.

You certainly need good credit to get a mortgage. According to Ellie Mae, in June the typical FICO score for a successful loan application was 727. That compares with 746 in June 2012. So, generally, there has been movement toward lower credit requirements.

In June, the closing rate for all loans was 64.2 percent, according to Ellie Mae. In June 2012 the closing rate was 46.2 percent.

The closing rates show a huge difference, the odds of a successful loan application are vastly better today than in 2012 when mortgage rates reached remarkable lows but many people could not get such financing.

It’s important to say that loans are easier to get this year for some people but not for everyone. You have to look at such issues as your credit score, the amount down and the type of financing you seek: FHA, VA, conventional, portfolio, or a “non-QM” loan like a jumbo mortgage.

You also have to shop around. Some lenders “layer” mortgage requirements. For instance, while you can get an FHA loan with 3.5 percent down and a 585 credit score from some lenders, while others might want 620 or 640. Why? Fear of liability when lending to borrowers with weak credit.

Also, let’s imagine that you have a loan application that does not go through. You have the documentation and paperwork in hand, so why not try with another lender? After all, if two-thirds of all loan applications are now successful and your application does not pass muster the first time around, maybe you need to work with a different lender who will see your situation in a better light.

Lastly, and for what it’s worth, on a personal basis it just seems a lot easier to deal with lenders. I recently modified a mortgage, expecting endless arguments, and it just didn’t happen. Instead, I spoke with people who were helpful and in the end got the terms I wanted. The lesson, I think, is that it pays to test the waters.

Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to peter@ctwfeatures.com.

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