Please ensure Javascript is enabled for purposes of website accessibility

JPMorgan Chase Tightens Home Borrowing Standards

By Bram Berkowitz - Updated Apr 13, 2020 at 10:10AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The bank recently said most new home loans will only be given to borrowers with a 700 credit score that make a 20% downpayment.

The country's largest bank is raising borrowing standards on home loans in order to reduce future exposure to an economic downturn brought on by the coronavirus pandemic.

JPMorgan Chase (JPM 0.95%) said customers applying for a mortgage will now need to have a credit score of 700 or above and make a 20% downpayment to qualify for a home loan, according to Reuters.

The change in lending criteria does not apply to existing mortgage customers, or to low- and moderate-income borrowers that may qualify for a mortgage with a lower credit score and much smaller downpayment.

JPMorgan Chase

Image Source: Getty

As JPMorgan grants mortgage deferments and extends lines of credit to business customers impacted by social distancing, appetite for additional risk will be small, especially with unemployment rising past 16 million people last week.

Additionally, the bank said the move will help free up staff to deal with a surge in refinancing activity that has resulted from lower interest rates.

If other banks follow JPMorgan's lead, the housing market could shift dramatically in future months.

Typically, lower mortgage rates increase buying activity because borrowers can purchase a home and get lower monthly interest rates. A flood of borrowers can create a seller's market with more demand on the buy side, obviously depending on the specific market.

However, if banks get more strict with lending standards, there will be less buyers in the market and potentially less competition for available homes for sale. That could result in a shift to a buyers market for at least a period of time.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

JPMorgan Chase & Co. Stock Quote
JPMorgan Chase & Co.
$123.63 (0.95%) $1.17

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/17/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.