Mortgage lenders still hesitant about borrower qualifications

In the wake of the housing market collapse, tightened lending regulation left a number of consumers unable to qualify for home loans.

In the wake of the housing market collapse, tightened lending regulation left a number of consumers unable to qualify for home loans. Meanwhile, despite recent gains reported throughout the housing market, a survey from the Federal Reserve indicates just how difficult it has become for these prospective borrowers.

According to the survey, 43 of the 52 financial institutions polled said they were less likely to approve a borrower with a FICO score of 620 and a 10 percent down payment nowadays then they were at the housing market's peak. In addition, if a borrower had a FICO score of 720 and down payment of 20 percent, only five banks said they were less likely to lend to them, while six said they were more likely.

However, recent improvements in credit conditions could spur more a lending activity in the coming months.   

"Overall, the improvement in domestic credit conditions provides a further boost to the outlook for the economic recovery as it could be a precursor of stronger consumer lending activity ahead," said TD Securities senior macro strategist Millan Mulraine.

As the economy continues to gain momentum, a number of analysts hope this will result in the financial safety and soundness many borrowers need to make the transition to homeownership.



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