Looser lending standards lift mortgage credit to three-year high as borrowers with lower scores gain access

Borrowers with lower credit scores now have access to more mortgage options than at any point in the past three years, as lending standards loosened across government, conforming, and jumbo loan markets. The Mortgage Bankers Association’s Mortgage Credit Availability Index (MCAI) hit a three-year high in March, reflecting expanded access even as the average 30-year fixed-rate mortgage climbed, deepening the lock-in effect for existing homeowners.

The MCAI’s rise was fueled by a 1.7% increase in government-sponsored loan availability, reversing a 0.8% drop in February. This rebound suggests lenders are regaining confidence in programs like those backed by the Federal Housing Administration, despite ongoing repayment struggles among current FHA borrowers. The Conventional MCAI rose 0.6%, and the Jumbo MCAI gained 0.8%, both marking their third consecutive monthly increases.

A key driver of broader access has been the expansion of non-qualified mortgage loan programs, which allow lenders to extend credit outside traditional underwriting standards. These programs have made it easier for borrowers who don’t meet conventional income or documentation requirements to secure financing. At the same time, streamline refinance options have grown for lower-credit-score borrowers, offering relief even as overall rates trend upward.

Higher mortgage rates have discouraged many existing homeowners from selling, limiting housing supply. But for first-time and credit-constrained buyers, the loosening of lending standards means more entry points into the market. The result is a diverging landscape: stronger access at the front door, even as the back door remains shut.