Banks Continue to Tighten Lending Standards
August 14, 2008
The results of a new survey released Monday by the Federal Reserve confirms what many people looking to buy or refinance already know — it’s hard to get approved for a loan.
The Fed’s July 2008 Senior Loan Officer Opinion Survey, which covered 52 domestic banks and 21 U.S. branches and agencies of foreign banks, found that 75 percent of those banks had tightened lending standards for prime loans since the previous survey, in April. Standards were tightened even more for “nontraditional” loans — 85 percent of banks that originate that type of loan said they had tightened standards on those loans. And six out of seven banks that originate subprime loans said they had tightened lending standards on those loans in the last three months.
The outlook for the remainder of the year isn’t much friendlier for easy financing. About 45 percent of loan officers from domestic banks said they expected their banks to tighten lending standards on prime home loans in the second half of they year, and about 65 percent said they expected standards on nontraditional and subprime loans to continue to tighten during the same time period.
It’s good that banks are adopting more stringent lending guidelines than the virtually nonexistent ones they employed during the 2005 to 2007 boom, which now many of those loans are going into foreclosure. Having good credit is now more important than it has ever been. Many clients still believe that the “no money down, bad credit” loans are still being offered, I’m sorry to inform you that those glory days are long gone.
If you are planning on purchasing a home in the San Antonio area in the near future, financing is the first step in the home buying process. Pre-Qualify Now for free with DHI Mortgage online and enter “Daniel Gaitan with Trend Setter Realty” as your REALTOR®. If you have bad credit or your credit needs some work, DHI Mortgage also offers a program called the Home Buyer’s Club which can assist you with Budgeting, Debt reduction, Establishing positive credit, Direct Bureau rescoring, Credit scoring models, Free credit reports, Intensive coaching and more. Depending on your credit score, the Home Buyer’s Club could have your credit repaired in 3 to 6 months.
REALTOR® is a federally registered collective membership mark which identifies a real estate professional who is a Member of the NATIONAL ASSOCIATION OF REALTORS® and subscribes to its strict Code of Ethics.
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