3 in 10 American Consumers May Not Qualify for a Home Loan
While the American housing market is starting to improve, it still has not recovered from the housing bubble.
One of the reasons why the market is still struggling could be because many Americans are not able to qualify for a home loan.
A recent study found 30 percent of Americans would likely not qualify for a home loan.
For this study, analysts looked at data from 13 million mortgage quotes and 225,000 loan purchase requests.
They found applicants with a credit score below 620 were unlikely to receive any quotes for a mortgage loan, even if they were willing to make a sizable 20 percent down payment. Fico reports just under 30 percent of Americans fall into this category.
“Applicants with a credit score below 620 were
unlikely to receive quotes for a mortgage loan.”
Researchers also found applicants needed a credit score of 740 or higher to qualify for the very best loan interest rates. This threshold was only 720 in 2010.
Applicants with the strongest credit scores received an average 30-year fixed interest rate of 4.42 percent. In comparison, applicants with scores between 620 and 740 received interest rates between 4.47 to 5.09 percent.
Considering the size of a mortgage loan, this difference means hundreds, if not thousands, of extra costs for borrowers without the best score.
However, they are still in better shape than the 30 percent of Americans that likely can’t qualify for a loan at all. Use this study as motivation to maintain good credit habits, as it will make buying a home much easier and less expensive.