The Detroit News, September 13, 2018: Home mortgages harder to get but safer
“For the average consumer, the biggest thing that has changed is it’s a lot clearer at the closing table what kind of loan you’re getting and what you can expect to pay over the life of the loan, and that’s a very good thing,” said Jesse Van Tol, CEO of the National Community Reinvestment Coalition, which advocates for fairness in housing, banking and business.
The guidelines may offer lenders a clear path on how to gauge qualified buyers, but in many cases banks have overlaid stricter qualifying requirements, like higher credit scores.
That’s one reason the average FICO score on home purchase loans has drifted about 21 points higher over the past decade, according to data from the Urban Institute. The trend is more pronounced in metropolitan areas with high home prices. Consider that in San Francisco, the average FICO score for borrowers is around 774. In the Riverside-San Bernardino metropolitan area east of Los Angeles, FICOs average 717.
The average FICO score in America was 700 last year. A score of 740-799 is considered “very good.”
“The pendulum has swung too far in the other direction,” Van Tol said. “When you look at a Fannie Mae or Freddie Mac-backed loan with an average credit score in the high 700s, homeownership at a 50-year low, and a lot of people boxed out of the mortgage market, certainly credit is too tight. Too few people have the opportunity to become homeowners today.”