The good news for potential home buyers this month is that nearly one-quarter of all banks eased their credit standards over the past few months on home loans. A report last month from the Federal Reserve showed that 23.9 percent of all banks eased credit standards for buyers with solid credit and incomes, which is the highest amount since the recession.
The previous FICO score required for a mortgage was around 640 for an FHA loan, but now a score of 600 may be accepted. FHA loans at loanDepot are available in both fixed and adjustable rates and only require a 3.5 percent down payment, making it easier for many borrowers to purchase a home.
Banks are seeing loans for those with sub-prime credit as less risky these days, which is the cause of the recent ease in credit standards. Housing prices have been rising over the past few months, so if a loan does fail, the bank will most likely not lose any money.
Those who are self-employed are also benefiting from the recent change in standards from banks and lenders. Due to their inconsistent income, banks were requiring the self-employed to put down as much as 35 percent, even with a great credit score. Now lenders are looking at other factors such as assets, equity and credit scores to make their decision without requiring a large down payment.
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