It is often said that the standards that govern mortgage lending are too tight and that anyone who does not have excellent credit will probably not qualify for a mortgage, but how true is this? The answer you get will depend on the individuals you ask and on what you mean. 

According to Quicken Loans chief economist Bob Walters, it is definitely harder when compared to the peak of the boom years when lenders did not require income documentation. Harder, but not impossible. He states that while many perceive the process of getting a mortgage loan as being extremely difficult, it actually is relatively easy for borrowers to get one if they have stable incomes and a down payment or equity along with good credit scores. 

So why do so many people think that getting a mortgage loan is so difficult?

Pava Leyrer is the president of Heritage National Mortgage in Michigan and she says that there is now more scrutiny for would-be borrowers. Leyrer says that even those with great credit are having to get over multiple hurdles. According to her, it is a matter of how many hurdles and how high the underwriters make those hurdles. 

She gives the example of lenders querying unusual deposits in the accounts of those who apply for loans. Something as simple as the borrower moving money from their savings account to their checking account can be seen as suspicious to some lenders and can present a hurdle for the borrower. Any large deposits from a source other than the borrower's employer may make lenders wonder if they are relying on gifts to qualify for the loan. According to Leyrer, a lender's definition of a "large deposit," may be as little as $500. 

FBC Mortgage mortgage originator, Jim Sahnger says that despite the stringency of the documentation that is required these days, the barriers to getting a loan are not insurmountable. According to him, getting over them is more of an inconvenience than an impossibility.

Is it possible for someone to get a mortgage loan if they do not have a 740 credit score?

Many potential homebuyers have the idea that they will need perfect credit to get a mortgage and therefore do not apply for a refinance or purchase loan. They fear being rejected, says Walters. While it is true that those with FICO credit scores above 740 will usually get the best mortgage rates, it is still possible for those with lower scores to qualify. It is possible for borrowers to get conventional loans with scores of 680 and a five percent down payment, Walters says. Federal Housing Administration (FHA) loans are available for those with lower scores. There are lenders that offer FHA loans to those with scores as low as 620 if they are able to put 3.5 percent down. The requirements in these cases tend to be very strict, however. 

Borrowers with sub-620 scores face greater obstacles to homeownership and will be required to have larger down payments, even for FHA loans. 90 percent of those who bought homes for the first time in 2012 had scores higher than 620, this is according to the Federal Reserve Bank of New York Consumer Credit Panel.

Leyrer states that anyone planning to get a mortgage in the near future should not assume that they will not qualify; no matter what their score is, they should plan carefully. They should consider their credit and how much debt they have; if they plan properly with those things in mind, they can get a mortgage loan. She says that most people fail to do this but that these days it makes sense for borrowers to understand their circumstances and prepare themselves.