From Florida Realtors
A study and analysis of 13 million loan quotes and more than 225,000 purchase loan requests on Zillow Mortgage Marketplace released last month found that 30 percent of Americans are unlikely to be approved for a mortgage loan.
The analysis covered applications in September 2013 compared it to a similar study in September 2010.
In September, borrowers with credit scores under 620 who requested quotes for 30-year fixed, conventional loans were unlikely to receive even one response – a number that’s unchanged from three years ago. The credit score challenge even affected applicants with a relatively high down payment of 15 to 25 percent.
Nationwide, nearly 3 out of 10 Americans have a credit score of 620 or lower, according to data provided by myFICO.com.
According to the study, those borrowers who qualify for a loan find it more difficult now to get the lowest available mortgage rates, which usually go to people with credit scores of 740 or higher, compared with 720 in 2010. According to myFICO.com, 40.3 percent of Americans currently fall into this category. In 2010, 47 percent of Americans had credit scores over 720.
The 720 level seemed to attract the best mortgage rates overall. Borrowers with credit scores above 740 did not receive significantly better rates.
Borrowers with credit scores of 740 or above got an average low annual percentage rate (APR) of 4.42 percent for conventional 30-year fixed mortgages last month. Borrowers with mid-range credit scores between 620 and 739 received APRs, on average, between 5.09 and 4.47 percent, with the APR rising as the credit score drops. Those with credit scores below 620 received too few loan quotes to calculate an average low APR.
“Despite all-time high levels of affordability in the housing market, tightened lending standards mean that nearly one-third of Americans are unlikely to be able to achieve the American Dream of homeownership … due to a low credit score,” says Erin Lantz, director of mortgages at Zillow. “To avoid any surprises when buying a home, check your credit score and report at least six months before you intend to buy to see if there are any costly inaccuracies, pay down high-balance lines of credit and make sure your bills are always paid on time.”