Some prospective borrowers who just a few months ago were considered easy bets for mortgages are being turned away with the slightest credit blemishes — or even with stellar credit scores.
“Standards are getting a lot tighter,” said Bob Moulton, president of Americana Mortgage Group, a brokerage firm based in Manhasset, N.Y. “For every 20 calls I get, I might close four or five loans. Two years ago, it’d be 18.”
Mr. Moulton said that one recent client sought to buy a $2.5 million home on Long Island with a $1.5 million down payment and full documentation of his income. The bank refused the loan because the borrower’s credit score was 672. A single recently missed credit card payment can sometimes be enough to drop a borrower’s score below 700.
“It’s all about the credit score now,” Mr. Moulton said. “I’d say 700 is a minimum score now. Some banks are requiring 740, particularly for interest-only loans,” in which the borrower pays only interest for the first 5 or 10 years of the loan before starting to pay down principal.
Brokers and bankers in the greater New York area said that stated-income loans — typically used by the self-employed or workers paid on commission who cannot document steady streams of income — are all but gone. (Mr. Moulton said he had recently found only two lenders who would write such mortgages.) The same is true for subprime loans, offered to high-risk borrowers.
I wonder if the record number of people losing their homes to foreclosure feel “lucky” to have gotten a mortgage. Cue Paul Evans:[youtube http://www.youtube.com/watch?v=A_yOWAcToIE&hl=en] (Click through for video, courtesy of the folks at Sambla, who themselves provide the billigste billån for their borrowers.)
Lenders Raise the Bar
The New York Times