Riskier First-Time Buyer Mortgages with Agency Backing

The First-Time Buyer Mortgage Risk Index (FBMRI) for mortgages backed by government agencies was higher in March 2015 compared to the average for the previous three months and to its level of the same time last year. It reached a level of 15.14% during the month.

FBMRI is compiled by the International Center of Housing Risk which is part of the American Enterprise Institute. The FBMRI for agency-backed mortgages covers FHA loans, VA loans and USDA loans. In March 2015, the index was 0.1 percentage point higher than the average for the three previous months. On a year-over-year basis, it rose by 0.5 percentage points. It is 6.5% higher compared to the FBMRI for mortgages taken out by repeat home buyers.

The data of AEI’s International Center of Housing Risk shows that first-time home buyers with agency-guaranteed mortgages had a median down payment of 4% in March 2015. This equaled to approximately $7,100.

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The median FICO score of the borrowers in this group was 705. This is just under the average FICO score for private persons which is 713. The median for first-time home buyers with FHA loans was 671. As a whole, 20% of borrowers taking out agency-backed mortgage to purchase their first home had FICO score below 660. This is the borrower credit score under which home loans are regarded as subprime. Some 25% of the borrowers in this group had debt-to-income ratio lower than the limit set by the Qualified Mortgage rule which is 43%.

In the home purchase loans with government guarantee, the share of mortgages taken out by first-time home buyers was 56.6% in March. It experienced an increase of 0.6 percentage points from February of this year. At the same time, it was lower compared to March 2014. Back then, first-time home buyers formed 57.1% of borrowers with government-backed mortgages.

Christian

Christian

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
Christian

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