Are credit score requirements really declining for major lenders?
Poli Mortgage Group, Inc.
Over the past several months, there has been a lot of talk about how credit standards for mortgages are finally easing after years of being extremely restrictive. However, new data suggests that overall, this isn't really the case, and is rather reflective of some borrowers moving to different types of lenders rather than more people coming into the market thanks to loosening requirements.
In fact, the overall pool of who is actually obtaining mortgage credit at all has barely changed in the one-year period between March 2013 and the same month this year, according to new data from the Urban Institute's MetroTrends Blog. For instance, through the end of March last year the average credit score approved for a mortgage stood at 731.1, and has since dropped to 728.5. While that is an improvement, it's a marginal one at best, almost not worth noting, and likely indicative that lenders' standards haven't actually relaxed.
The reason for the change
So why, then, has there been a more than five-point drop for standards at the government-sponsored mortgage-backing giants? The reason is that more borrowers with slightly higher credit scores are no longer seeking out mortgages through the Federal Housing Administration in particular, and are instead turning to private lenders and the GSEs. That has brought the average credit score on an approved mortgage request down across the board, but most heavily for the FHA, where the drop came to nearly 11 points.
And because FHA loans tend to go to consumers with lower ratings in the first place, the people shifting to alternative options are likewise bringing down their average approved score, the report said. Overall, though, it seems that there hasn't been a significant credit easing for the entire home loan market.
Borrowers who are concerned about the ways in which still-high credit standards and declining affordability will affect their ability to get a mortgage are still able to research rates on the Poli Mortgage Group's website, 24 hours a day and seven days a week, without having to provide any personal information at all. When it comes time for them to buy, they will also be able to speak directly with a Loan Officer, all they'll have to do is simply fill out a Contact Us form on the website or call 866-353-7654, and a representative will get back to them shortly.