The Credit Score Obstacle

• April 4, 2012

by Shilpi Paul

Having a credit score of 730 is considered to be very good in most circles, but apparently not good enough to get a home loan.

An article in The Wall Street Journal on Wednesday noted that banks are now demanding even higher credit scores and bigger down payments on home loans than they have in the past. A report from mortgage software provider Ellie Mae revealed that applicants with credit scores that were previously deemed good are now the reasons that loans are being denied as banks get increasingly cautious.

From WSJ:

Loans closed by banks and mortgage lenders in February had borrowers with a credit score of 750, up from 740 six months earlier, and an average loan-to-value ratio of 76%. The average denied loan had a credit score of 699 and a loan-to-value ratio of 83%. “Talk about high-quality loans — those are pristine,” says Jonathan Corr, chief operating officer of Ellie Mae.

A couple more interesting facts from the piece: the average refinancing applicant going through Fannie Mae and Freddie Mac had a credit score of 770, and the average denied borrower for a “conforming” refinance mortgage had a score of 720; most people don’t have a score of over 800.

You can read the full article here.

This article originally published at http://dc.urbanturf.com/articles/blog/the_credit_score_obstacle/5372