It is getting easier
National residential lenders are easing credit standards to keep the housing market moving, though the changes bring lending nowhere near the ultra-loose credit environment that sparked the financial crisis. Fannie Mae and Freddie Mac – the government-controlled companies that purchase home loans from lenders to keep the market on even keel – are rolling out new programs to encourage homeownership.
Earlier this year, the GSEs flagged affordability challenges as the biggest barrier to housing growth. In response, Fannie Mae is now allowing borrowers to have higher debt levels and still qualify for a home loan. This includes raising the debt-to-income ratio limit to 50% of pre-tax income from 45% previously for manually underwritten loans — loans not approved through their automated underwriting system.
In addition, the nation’s three major credit agencies – Equifax, TransUnion and Experian – are also dropping tax liens and civil judgments from some consumers’ credit profiles. This will enable more Americans to qualify for a home loan. More recently, Fannie Mae and Freddie Mac also announced programs to allow for purchase loans without appraisals, although the loans that qualify are limited to start out with.
Source: GoRion, Fannie Mae and Freddie Mac