With the recent pandemic taking it’s toll we’ve seen conventional financing at all time high. This is because government lending is having difficulty getting guarantees. The government backed loans like FHA, VA and USDA have restricted their credit score requirements in an effort to curb risky lending. This has caused more borrowers to lean towards the non-government backed loans.
Conventional Rates Dive
With conventional financing edging its way into the limelight it has made incredibly low fixed rates for top-tier borrowers. A top tier borrower is someone with a credit score exceeding 740. Now more than ever larger down payments are the saving grace for those borrowers who can afford them. The pandemic has caused a shift in the mortgage market that favors the best of borrowers.
Certain Mortgage Products are Now Unavailable
Adjustable Rate Mortgages are still available but the appeal for a lower rate is diminished because the rates are comparable to 30 year fixed. Historically people have gravitated towards adjustable rate mortgages when there is a large difference in rates and it’s worth their time, with rates to close it almost eliminates the benefit.
Cash out refinances:
Cash out refinances have been limited with some lenders, meaning the amount of money they will allow you to take out has been decreased. Lenders have also made the rates for these refinances higher to discourage this type of business for the time being.
Self Employed Borrowers
Lenders have become stricter on self employed borrowers. Instead of allowing 100% of their qualified income, they are held to only using 75%. This has lowered the amount of self employed borrowers that can qualify.
The Take Away
We still are able to do VA / FHA / USDA loans, they are highly popular right now for many borrowers. Even though the credit restrictions have increased, there are avenues for these clients. The conclusion of this article is meant to show you that it’s a great time to buy or refinance if you are a top tier borrower with good credit, the market has dipped and this has created a favorable environment for the most qualified applicants.
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