We find one of the biggest obstacles home buyers are facing is qualifying for financing, and a new report by the Federal Reserve shows exactly how big of struggle potential borrowers face. The report found that most banks say they are a lot less likely to issue a mortgage to borrowers with a qualifying for financingof 620 and a 10 percent down payment than they were in 2006 during the housing boom.
“A moderate net fraction of banks were less likely to originate loans to borrowers with a FICO score of 680, regardless of down payment size,” the report also said. “A modest net fraction of banks were less likely to originate loans to borrowers with a FICO score of 720 and a 10 percent down payment, although survey respondents indicated that they were about as likely to originate loans now as they were in 2006 if such borrowers had a down payment of 20 percent.”
As a recent New York Times article about the Federal Reserve’s report illustrates: “A borrower with a credit score of 720 can expect a rate of 3.70 percent on a 30-year, $300,000 fixed-rate mortgage … while someone with a score of 620 to 639 can expect a 5.07 percent rate — or an extra $242 per monthly payment.”
So while mortgage rates continue to sink to new record lows, many home buyers are finding they can’t always qualify for the low rates. This has been happening for the past 3+ years in our market. Please comment about loan conditions in your local area!
Source: “How to Pump Up Your Credit Score,” The New York Times (May 17, 2012)