Lower Average Credit Score on New Loans

Mortgage applicants now have higher chances of getting approved for a loan even with a lower credit score. The statistics show that the average FICO credit score on approved home loans has hit its lowest point in two years. This is more than positive news for prospect home buyers.


The FICO score is the credit score which is most widely used by lenders when they are evaluating mortgage applicants. Now the average FICO score on approved loans is 724. This time last year it was 745. The decrease is significant and shows a positive trend. Lenders are now becoming more flexible and more lenient towards borrowers as the economy is improving. After the severe restrictions on the maximum loan-to-value ratio and on the higher-risk loans as a whole, at present, lenders have more confidence when offering house financing.

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The FHA loans have the largest contribution towards the drop in the average credit score on approved mortgages. As part of the Federal Housing Administration’s requirements, the minimum score for FHA loan approval is 580. However, over the past two years lenders exercised their right to impose a higher approval limit and set it at 640.

Since the start of 2014, a few leading lenders have lowered their credit score requirement for FHA loans to 600. This decrease of 40 points is double compared to the decrease of the average credit score. It is one of the major factors which have contributed to the increase in the market share of FHA loans to the highest percentage (22%) since this time last year. This increase in the market share has been achieved despite the fact that the mortgage insurance premium went up.

Is it all good news for mortgage applicants? It is now easier to secure a loan with lower credit score, but the cost of borrowing is likely to go up. The interest rates on home loans are on the rise and a considerable spike is expected in the coming months.



Christian Calvin mortgage Christian is a contributing writer for Mortgage.info. He is a graduate from the University of Tennessee with a degree in Communications and a concentration in Broadcasting. Christian has served as vice-president for a privately-held company for more than 20 years. Additionally, he has also applied his writing and business knowledge to various websites with a focus on business and sports news . . . both of which are passions. Christian enjoys playing golf and spending time with his family and friends.

Contact: christian@mortgage.info

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