Normal Mortgage Loan Market? We’re In It

Wondering when it will become easier to get a mortgage? Don’t start holding your breath until you’ve read Chicago Tribune real estate writer Mary Umberger’s interview with Greg McBride, senior financial analyst for Bankrate, Inc., a Florida-based financial-research firm.

McBride describes the new sobriety in lending as just a return to pre-bubble normalcy. Here’s a summary of some of his other key points:

  • The fact that one out of four borrowers are currently being rejected for mortgages still means that three-quarters of applicants are getting approved – not bad when unemployment is over 9%.
  • Americans’ median credit score, according to Bankrate Inc’s tracking, is now about 700 on an 850-point scale. That’s not far from where it was a few years ago. Most people do pay their bills on time.
  • It takes a score of 680 or above to get a loan today (at least, to get one without difficulty or paying a high interest rate). A score of 740 or above will get you the best interest rate.
  • Credit scores aren’t everything in getting a mortgage. You’ll need a combination of good credit, proof of income, and a down payment.
  • That down payment won’t necessarily need to be 20 percent. Although new federal regulations (the “qualified residential mortgage” or QRM regs now under consideration) mean the feds won’t, in many cases, back mortgages with less than that amount down, “It’s not that loans that don’t meet the QRM standard won’t be made,” and “Over time, as housing stabilizes, you’ll see a return of credit availability for higher loan-to-value loans.”