In the wake of the housing market collapse, a number of mortgage lenders tightened their standards, making it more difficult for prospective borrowers to obtain home loans.
As the real estate industry finally starts to gain momentum after years of instability, the Wall Street Journal reports that many of these standards could remain in place despite economic improvements.
Currently, a large number of home loans are backed by government agencies, such as the Federal Housing Administration, Fannie Mae and Freddie Mac. After the recession, Fannie and Freddie were hit especially hard by a rising presence of mortgage defaults and foreclosed houses.
Mortgage records indicate that in February the average borrower credit score for a new home loan was 750, up from 740 six months earlier. In addition, the average loan-to-value ratio was 76 percent.
In contrast, it was found that borrowers who were denied loans had an average credit score of 699 and an LTV ratio of 83 percent.
To curb any fears that the FHA might have to buy back another wave of loan default, the strict lending regulation that was implemented for the government-sponsored enterprises will remain for now, the newspaper reports.