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Moving made difficult by tightening mortgage standards

September 17, 2010 - While low mortgages purport to make relocating more affordable than ever, some are finding it difficult to qualify for a mortgage in today's economy.

Banks are tightening their credit standards and only handing out the best mortgage rates to borrowers with high credit scores, reports Bankrate.com. Typically, this means that consumers with scores below 740 are finding that they cannot qualify for low rates and must compromise by either paying more on interest, or dishing out more cash upfront in points added on to their closing costs. Douglas Brenner, a senior loan officer with a Maryland-based lender, told the site that the added cost can amount to as much as $12,000 more upfront.

Lenders are feeling the pressure from the government mortgage insuring institutions, Fannie Mae and Freddie Mac, Brenner told the site. "Fannie Mae and Freddie Mac looked at credit scores and loan performance and realized that borrowers with lower credit scores are far more likely to default on their loan than borrowers with higher scores."

So while Freddie Mac reports that a 30-year fixed rate mortgage averages a rate of 4.37 percent, many relocating families might find a much higher rate when negotiating a mortgage.

Banks are reluctant to take on more debt given the huge losses they've already suffered. Moody's reports that banks can expect another $268 billion in losses from bad loans before the end of 2011.
 

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