Home loan approval standards beginning to ease

There is some good news for potential home buyers this week, as it seems some banks are starting to ease their mortgage-lending standards. Even for buyers with good credit, getting a prime mortgage has been a bit of a challenge since the housing bust last decade.

An improving economy and more competition from more banks and lenders have caused the standards to get a loan to lower, according to the Wall Street Journal. As home prices slowly start to increase again, and refinancing activity slows down, lending standards will continue to decrease as well.

Demand for prime mortgages is at its highest level in a year, which is good news for the housing market and its recovery. Federal policy makers have been concerned that tight standards are hurting the housing market, as those without great credit really need to search to get approved for a home loan.

In the past, lending standards would have eased more by now. New regulations and costs dealing with defaulted mortgages and penalties for failing to verify a borrower’s ability to repay a mortgage means that banks are still very cautious. Those looking to get a federally backed FHA loan are much more likely to get approved by a lender such as loanDepot, as they are exempt from many of these regulations.

Many Americans are still unable to qualify for a mortgage though due to a variety of circumstances. Many have higher than average levels of debt, are still suffering from damaged credit from the recession and do not have a high enough income.