Lenders Loosening Mortgage Eligibility Requirements
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What is the main topic discussed in this episode?
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Here's your money briefing for Monday, April 4th. I'm J.R. Whalen for The Wall Street Journal. Rising prices and higher interest rates, not to mention bidding wars, are keeping many prospective homebuyers on the sidelines.
How are mortgage rates trending and where do they stand now?
But there is some good news. Lenders are starting to relax some of the eligibility requirements to get a mortgage.
Some lenders are easing minimum credit scores and allowing borrowers to take out larger loans relative to the value of the homes they're buying. That's helpful because new loan types can allow for bigger loans or lower upfront payments.
WSJ economics reporter Orla McCaffrey tracks the housing market as part of her beat. Coming up, we'll talk to her about that and whether with rising inflation, there are concerns about homebuyers getting in over their heads. That's after the break.
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Why are rising rates and prices keeping buyers from applying for mortgages?
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The housing market hasn't loosened up, but higher prices and higher interest rates are now keeping many would-be homeowners from applying for mortgages. And that's not good for lenders. WSJ economics reporter Orla McCaffrey is here with us to discuss what they're trying to do about it. Hey, Orla, thanks for being with us. Thanks for having me. So, Orla, first of all, catch us up on mortgage rates. We've seen them tick higher recently, but where do they stand as of now?
Mortgage rates as of the last reading are 4.67%. So really within sight of 5% for the first time in basically four years, which is crazy to think because they were low threes, high twos just at the end of 2021.
So rising rates typically translate to reduced demand by borrowers, right?
So overall, industry-wide, volume is down compared to the last two years, which were definitely a boom in the mortgage industry. And that's because refinance volumes have been driven down by high rates. But the important thing is there's still plenty of demand for purchase homes. Everyone wants to buy a house because rates are still historically low and rents are rising anyway. And a lot of Americans are placing more value on homes, right? Because for a lot of people, it's their primary workspace now, too.
Okay, but this brings up the age-old question in this housing market, age-old going back a year and a half, which comes down to extremely low inventory.
Yes, that's probably, if you ask almost anyone at any end of the housing market, whether it's an economist who looks at trends, whether it's a real estate agent, whether it's somebody just trying to be a first-time homebuyer, low inventory is the big problem. I think the latest reading was at the current sales pace, there's 1.6 months of supply left on the market, which is just a record low and that just increases competition for what would have been considered really not desirable homes just a couple of years ago. And that's really what's driving up prices so much.
What eligibility requirements are lenders beginning to relax?
So what does this all mean for prospective homebuyers? How is this process actually becoming easier for them?
Some lenders are easing minimum credit scores and allowing borrowers to take out larger loans relative to the value of the homes they're buying.
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Chapters
6 chapters
1
What is the main topic discussed in this episode?
0:00–0:47
2
How are mortgage rates trending and where do they stand now?
0:47–1:46
3
Why are rising rates and prices keeping buyers from applying for mortgages?
1:46–3:41
4
What eligibility requirements are lenders beginning to relax?
3:41–5:58
5
Which borrowers benefit from qualifying with bank and investment statements?
5:58–8:08
6
What loan types (like jumbo loans) are lenders offering more readily?
8:08–9:21
Speakers
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