Credit requirements for home loans still remain very restrictive even though the banks offer loans and credit cards to riskier borrowers. This has been very well-documented, but till date, nobody has been able to crunch the actual figure of how good an applicant’s credit record needs to be in a case, he/she wishes to refinance an existing mortgage or want to buy a house. Off lately, we have heard the term “720 is the new 680.” However, this is not true. Today, even a score of 720 is not considered good.
A recent analysis shows that the average FICO score of the successful applicant was 764. These applicants also had an average down payments of 22%. For homeowners who wish to acquire refinance, the standard is even higher: The average FICO score of these applicants was 770.
Even the borrowers whose applications were rejected had a FICO score of 732. This shows that the range is skewing so high that prospective borrowers are self-selecting. This indicates that people with good credit are not even trying to get a home loan and showcases the discouraging reality of present day mortgage market.
A study was undertaken by the Times Group also analysed the requirements to get a loan through the Federal Housing Administration. Loans offered by the FHA aims to help people with less credit or lower income obtain home financing; however, the same problem of extremely high scores curbs the mortgage. People who have got FHA mortgages have a reasonable FICO score of 701.
Considering the overview, the market only favours ultra-low risk borrowers, and the dividing line between subprime and prime credit is 660. This demands a credit score of about 100 points for a mortgage.
Data released by a leading credit education website shows that an average person will have a credit score of 660 and hence to qualify for a loan people will have to maintain a good score. The median credit score, laid by FICO is 711 and any score below that, the lenders will show a red signal to the applicant.
This is certainly a point that needs to be considered by would-be borrowers. It is an indication that the real estate market is stuck in neutral for some time to come. Even if property prices drop, homes will not sell if a majority of the applicants do not qualify for mortgages.
Hence, maintaining a good credit history and score is crucial. In case, you find any problem in your credit report then disputes the same immediately. You can also choose to hire the services of a credit rectification company. Browse the net for more information on the same and make sure you hire the services of the one who offers quality service at pocket-friendly rates.