Wells Fargo and Other Lenders Are Lowering Their Credit Standards
Ever since the Housing Crisis, banks have tightened up on lending with the strictest credit standards in more than twenty years. According to Ellie Mae, by 2011 the average credit score of an approved mortgage reached 750. This has resulted in qualified borrowers not being able to get credit, and has prevented as many as 1.2 million loans from being made in 2012.
However, banks are slowly starting to ease up on their strict standards after seeing the amount of mortgages fall. Only 58 percent of independent mortgage banks and bank home-loan units were profitable in the final quarter of 2013, according to the Mortgage Bankers Association (MBA).
Wells Fargo cut its minimum credit score for Fannie Mae and Freddie Mac loans to 620 from 660. This is following many small lenders who have done the same. The MBA stated that in March credit standards were the loosest in at least two years. More than 23 percent of the mortgages in March went to property buyers with FICO scores less than 720 (a 720 is considered above-average). This is a huge increase from 15 percent in mid-2012.
Banks are also making exceptions for credit problems caused during the recession if the borrower has more than typical assets in their bank account or if they meet certain “extenuating circumstance” FHA guidelines.
Obviously credit scores are still extremely important for mortgages and other loans. This information means it will be easier to qualify for better loans with a good credit score and allow you to save more money in the process.