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Report: More people moving using nontraditional homebuying methods

September 24, 2010 - From 2006 to 2009, nontraditional financing methods grew in popularity among relocating families.

That was according to a report on the mortgage market by the Federal Financial Institutions Examination Council. That analysis revealed that during that three year period, the number of people moving into owner-occupied homes using traditional mortgages fell 56 percent, even while favorable mortgage rates and home prices made moving into a new home with a mortgage relatively affordable.

Instead, the popularity of nontraditional lending methods tripled in that time period, said the report. Even homeowners refinancing their mortgages began to choose nontraditional means at an increasing rate. In 2006, there were 44 conventional refinanced loans for every nontraditional one. But by 2009, that ratio had shrunk to 5 to 1.

The sliding popularity of traditional loans might be tied to increasing lender restrictions, which have made it more difficult for relocating homebuyers to quality for a mortgage. Most banks are looking to reduce risk, and are therefore carefully assessing mortgage applicants' credit reports.

Low credit scores can throw a wrench in consumers' moving plans. According to Bankrate.com, consumers with credit scores less than 620 will likely pay higher interest rates or closing cost points, while borrowers with scores below 500 might not even be considered for a loan.
 

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