A recent Washington Post article reported that credit standards continue to tighten for hopeful Americans looking to own their own home. According to the news source, the most recent average FICO credit score for approved borrowers to refinance with Fannie Mae or Freddie Mac is 769, up six points from August 2011.
The average score for borrowers purchasing homes was 763 – one point higher than the year before.
Doug Duncan, chief economist for Fannie Mae and former chief economist for the Mortgage Bankers Association (MBA) told the news source that big banks like Fannie Mae and Freddie Mac are seeing their highest-quality "books of business" perhaps ever. This is in large part due to their seemingly strict lending standards and documentation rules.
Duncan added, though, that with the Dodd-Frank financial reform legislation, lenders will have fewer fears about possible "buyback" demands from the government-sponsored enterprises of Fannie Mae and Freddie Mac.
A report released last week by the U.S. Census Bureau said that the homeownership rate is at 65.5 percent, proving that a majority of Americans are still committed to owning their own house.
The rate remains relatively unchanged from the second quarter of last year, where it stood close to 69.5 percent.
Even with stricter lending standards, Americans continue to prove that they want to own their own home rather than rent. As such, there are still options available that can allow for satisfactory lending practices.
Mortgage loan software would benefit both the lender and the borrower. With this tool, a repayment plan can be created that will not force homeowners further into debt, but it will also meet the needs of the lending party. When paired with an amortization schedule for loans, it can be ensured that the borrower will be able to stay on top of his or her payments.