Stricter Mortgage Requirements Discouraging Home Buyers with Low FICO Score


A recent survey conducted by the Federal Reserve Bank of New York has revealed that the number of low FICO score holders who are discouraged from buying a home is growing.

In May 2013, the share of discouraged mortgage applicants in the group of prospect home buyers with FICO score lower than 680 was 14%. In February 2014, it was 22%. The increase was 37%.

In the group of prospects with FICO scores between 680 and 760, the share of discouraged mortgage applicants grew from 1% in May 2013 to 3% in May 2014. In total, the share of discouraged applicants rose from 7% to 8% during this period.

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In the group with FICO scores over 760, the share of discouraged applicants dropped from 1% to 0% from February 2013 to May 2014. At the same time, the share of buyers who preferred to purchase a property without using mortgage finance rose from 45% to 48% during the period. The share of all-cash sales in the group with FICO scores between 680 and 760 increased as well. It went up from 34% to 39% in a little over a year.

Goldman Sachs experts who analyzed the relationship between FICO scores and mortgage approval have concluded that the home loans with the most favorable interest rates and terms and conditions go to applicants with FICO score over 740. FICO score of 680 is the minimum for qualifying for a conventional home loan with down payment which can be as low as 5%. 33% of mortgage applicants who have FICO score of 630 get rejected. There are still lenders who offer FHA loans to applicants with score of 620. However, such home loans come with stricter repayment requirements.

The analysis revealed that around 15% of the homeowners who obtained a mortgage before the introduction of the stricter qualifying criteria in the beginning of 2014 would not qualify now.



Christian Calvin mortgage Christian is a contributing writer for 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.


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