Average Credit Scores Up for Mortgage Loans
Minneapolis, MN: The quality of the average home buyer continued to climb in 2016, making for the highert quality of home loans since 2001. Getting better in three categories; credit score, debt ratio, and equity position.
The average credit score in 3rd quarter 2016 came in at 739. This is up from 734 at this point last year.
Average loan-to-value, which is the difference between the properties appraised value and the actual loan amount, moved down to 85.60%, which was down from 86.80% last year.
Finally, the average debt-to-income ratio improved to just 35.40% of income, versus 35.70% in 2015.
Poor Credit Loans? The haves versus have nots.
While better qualified people have always been able to obtain home financing, those with weaker profiles continue to have difficulty finding mortgage loans in 2016.
Starting around 2001, easy credit was the name of the game, and it seemed just about anyone and any situation could obtain home financing.
With the real estate market collapse after 2006, easy credit very quickly went away. It was replaced with significantly more strick underwriting guidelines. Easy credit programs like stated income loans, no proof of income, 100% financing, bad credit loans, low credit score options, bank statement programs, and 80/20 loans went the way of the Dodo bird.
Fast forward to today, and mortgage loan underwriting guidelines have eased significantly, but from a realistic point of view, we are simply back to more traditional guideslines of pre-2001.
Joe Metzler is a Senior Mortgage Loan Officer for Minnesota based Mortgages Unlimited. He was named the 2014 Minnesota Loan Officer of the Year, and Top 300 Loan Officers in the Nation for 2010, 2015, 2016. He provides Home Mortgage Loans in MN, WI, and SD. He can be reached at (651) 552-3681. NMLS 274132