Banks change their lending practices in 2009

Since the Real Estate markets & general economy has entered a period of instability banks have been changing their lending practices. Bank stocks have taken a beating in the markets as most banks find themselves carrying some form of bad debt. Banks have been more cautious lending to individuals and small business fearing even higher rates of loan defaults. Home mortgages are among the loans lending institutions are less willing to give out.

If you’re a buyer shopping for a new mortgage you might be affected by the changing lending practices. Through the buying process we’re constantly in communication whith a number of the lenders and we’re updated pretty much on a daily basis.

I recently had a conversation with Gary Bains from Ronin Mortgage Group and he outlined a few changes he’s noticed. Lenders are more thorough confirming all the information about clients and are less likely to lend to buyers with lower credit scores. For buyers who are purchasing a home with a suite for rental income, some lenders are no longer willing to consider this extra form of revenue.

Tony Iannetti with Global Mortgage Corp, is a another mortgage broker who has recenlty written a lending update which outlines similar changes to bank practices. Toni’s update is posted below:

“In our current Economic environment, Credit history and Credit scores become
very important and relied upon heavily by Lenders. To help better
understand what impacts a credit score, I have outlined weightings below.

PAYMENT HISTORY; 35% weighting.
OUTSTANDING DEBT; 35% weighting.
CREDIT ACCOUNT HISTORY; 15% weighting
RECENT INQUIRIES; 10% weighting
TYPES OF CREDIT; 10% weighting

Late payments and the amount of outstanding debt has the biggest impact on a
credit score. Line of Credit mortgages and mortgages from Credit Unions are
reported on the credit bureau and can have a Negative impact on a customers
Credit score. Customers should understand what and how their mortgages may
impact their Credit score.”

For more information on this topic feel free to contact us through our contact page or feel free to leave us a comment to this blog.