Here are five ways that mortgage experts say the market is becoming more flexible:
1. Some lenders are easing payment and credit score requirements. Having a modest down payment or a lower than stellar credit score won’t necessarily keep you from buying a home. Between March 2011 and March 2013, Zillow Mortgage Marketplace saw a 570 percent increase in the number of lenders offering conforming loan quotes with down payments between 3.5 percent and 5 percent, Lantz said. That does not include the Federal Housing Administration, which allows down payments of 3.5 percent.
If a borrower can provide a bigger down payment, a bank may dial back on a high credit score requirement. Cecala said lenders have wiggle room because of overlays, standards they impose above those required by mortgage giants Fannie Mae and Freddie Mac.
2. Piggyback loans are popping up. The term describes two mortgages taken out at the same time for one property, so a borrower can avoid paying for private mortgage insurance on a traditional loan representing more than 80 percent of a home’s value. Piggybacks also help borrowers avoid higher interest rates on jumbo mortgages.
Jeff Lazerson, who runs an online brokerage in Laguna Niguel, Calif., says he began offering piggyback loans again this year, allowing borrowers to refinance up to 90 percent of the value of their homes. But unlike piggyback loans in the past, he said, “With these, you have to income-qualify for it and have some skin in the game.”
He says the loans are conservatively underwritten, requiring at least a 700 credit score even if the borrower has put down more than 10 percent on the mortgage.
