Stricter Underwriting Guidelines for Home Mortgages

Sheryl Landrum
LoanBiz Columnist


Lenders are reeling from the high foreclosure rate in home mortgages; to protect themselves from further mortgage defaults, they are developing stricter underwriting conditions. What changes are being made in the mortgage industry and how will they affect your new home loan?

Borrowers can expect higher credit score requirements, more documentation, higher interest rates, and lower loan amounts for many mortgage products.  New underwriting guidelines from many lenders include:

• 100% CLTV (combined loan to value) mortgage loans are generally not offered to first time homebuyers who are SISA (stated income stated asset).
• In general, first time homebuyers with credit of 700 or higher who have full documentation can go to 100% CLTV, but have a maximum first mortgage loan limit of $350,000.
• First time homebuyers with credit scores of 740 and higher may go SISA for up to a 95% CLTV but have a maximum first mortgage loan limit of $200,000 in most cases.
• Underwriting adjustments affecting 90-100% loans for many lenders are:
  1. 740 credit scores for SISA
  2. 700 credit scores for full-doc
• Loans with higher CLTVs may be subject to higher interest rate or loan fee add-ons to compensate the lender for the extra risk.

Keep in mind that programs, rates, and terms are subject to change without notice--the examples in this column have been provided for illustration only. While it may make it tougher for borrowers to qualify for new home loans without a solid down payment or to access much of their home's equity when refinancing, these guidelines should contribute to a decline in home foreclosures.

About the Author
Sheryl Landrum is a Senior Loan Officer with First Capital Mortgage in San Diego and Prudential Realty in Bonsall, California.