Mortgage originations for borrowers with credit scores below 620 have mostly disappeared in recent years, eliminating borrowers with low credit scores from the housing market.
Mortgages for borrowers with a credit score between 620 and 680 tumbled nearly 90%, compared to a 30% drop for borrowers with a score greater than 780, according to the Federal Reserve.
Meanwhile, the median credit score skyrocketed from 730 in 2007 to a whopping 770 in 2013.
Credit challenged borrowers have have turned to mortgages insured or guaranteed by the Federal Housing Administration (FHA), the Department of Veteran Affairs(VA)and the Rural Housing Service (RHS). As a result, the share of purchase mortgages guaranteed or insured by the FHA, the VA, or the RHS escalated from 5% in 2006 to more than 40% in 2011.
According to the Federal Reserve’s April survey of loan officers and bank lenders, banks are less likely to originate mortgages with FICO scores in the 620 range, even with a 10% or 20% down payment.
Wallingford PA Real Estate – Wallingford, PA 19086
