Consumer Lending, Housing Market

Borrowers with lower credit scores may have easier time obtaining mortgages

MortgageThe average credit score for approved mortgages fell to 727 in December—compared to 748 the previous year—indicating that borrowers with lower credit scores may be able to more easily obtain a mortgage.

According to data released by Ellie Mae on Wednesday, 46 percent of mortgages closed in December had applicants with credit scores higher than 750, while 57 percent of mortgages had applicants with scores higher than 750 in December 2012.

Approximately one-third of all mortgages had credit scores below 700 in December, compared to 21 percent one year earlier.

Lenders may be more willing to make loans due to rising home prices over the past year, according to the National Association of Realtors. Also, fewer consumers are refinancing mortgages, which may add to lenders’ willingness to loan to individuals with lower credit scores.

Wells Fargo funded $50 billion in residential mortgages in the fourth quarter, a 60 percent decrease from the previous year, and JPMorgan saw a 54 percent drop in refinances in the fourth quarter to $23.3 billion—the bank’s lowest amount in originations since before the 2008 financial crisis.

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