Analysis: One-Third of Americans Highly Unlikely to Qualify for a Mortgage Today

Real Estate Agent with Keller Williams

Analysis: One-Third of Americans Highly Unlikely to Qualify for a Mortgage Today

RISMEDIA, September 28, 2010--Nearly one-third of Americans are unlikely to qualify for a mortgage because their credit scores are too low, making homeownership out of reach for many. This is according to an analysis of more than 25,000 loan quotes and purchase requests on Zillow Mortgage Marketplace during the first half of September.

Borrowers with credit scores under 620 who requested purchase loan quotes for 30-year fixed, conventional loans were unlikely to receive even one loan quote on Zillow Mortgage Marketplace, even if they offered a relatively high down payment of 15 to 25 percent. Nearly one-third of Americans, or 29.3 percent, has a credit score this low, according to data provided by

Meanwhile, the lowest interest rates went to mortgage borrowers who were among the 47 percent of Americans with excellent credit scores of 720 or above.

In the first half of September, borrowers with credit scores of 720 or above got an average low annual percentage rate (APR) of 4.3 percent for conventional 30-year fixed mortgages. Borrowers with mid-range credit scores between 620 and 719 received APRs between 4.73 and 4.44 percent, with the APR rising as credit score drops. Those with credit scores below 620 received too few loan quotes to calculate average low APR.

For those with mid-range credit scores of 620 to 719, improving one's credit score can mean a significant savings in interest over time. For each 20-point credit score increase, the average low APR declines 0.12 percent, which for a $300,000 home, with a 20 percent down payment, equates to a savings of $6,400 over the life of a 30-year loan.

"We are in an era of historically low mortgage rates, reaching levels not seen in decades. Coupled with four years of home value declines, homes are more affordable than we've seen for years. But the irony here is that so many Americans can't qualify for these low rates, or can't qualify for a mortgage at all," said Zillow Chief Economist Dr. Stan Humphries. "Four years ago, in the era of easy-to-get subprime loans, many borrowers with low scores did buy homes, which in turn helped contribute to a housing bubble. Today's tighter credit is a predictable response by banks after the foreclosure crisis, but also keeps a cap on housing demand, which is important for the greater housing market recovery."

Comments (4)

Jimmy Katz
Wynd Realty & Katz Realty Group - Alpharetta, GA
"REAL Solutions for Real Estate!"

i do not show anyone properties anymore without them being pre-qualified first for that very reason

Sep 28, 2010 03:19 AM
Lori Bowers
La Quinta, CA
The Lori Bowers Group

I would say itis higher than 30%. Many people have good credit scores,but alot of tax write offs so not enough bottomline income on their tax returns. There has to be some middle ground between stated income and totally documented income for the small business people, the actual investors in America.

Sep 28, 2010 03:19 AM
Keshia "K" Torruella
Jacksonville, FL
Keshia "K" Torruella

This is so Ironic, and a bit cruel as we see such incredible home within arms length! It truly is a blessing if you are able to get qualified for a loan. The customers that I am working with are very savvy and aren't taking anything for granted! Great post.

Sep 28, 2010 03:20 AM
Mike Carlier
Lakeville, MN
More opinions than you want to hear about.

There are a lot of homeowners who would like to move up and have the financial ability to comfortably meet a higher monthly payment.  Unfortunately, even with otherwise good credit, they owe more on their current home than it is worth.  If the lending industry could find a profitable way to accommodate this group, there would be considerable movement in housing.  Transfer neg equity in a 140% LTV loan to a new larger 120% LTV loan with considerably higher monthly debt service?  Why not?

Sep 28, 2010 03:25 AM