The average credit score for home buyers increased 5 points year-over-year between the third quarter of 2015 and third quarter of 2016, rising from 734 to 739, according to latest CoreLogic Housing Credit Index.
In the third quarter of 2016, the share of home buyers with credit scores under 640 dropped by more than three-quarters compared with 2001.
Meanwhile, the “loan to value,” or LTV, for home buyers decreased about 1 percentage point between Q3 2015 and Q3 2016, declining from 86.8 percent to 85.6 percent. In Q3 2016, the share of home buyers with an LTV greater than or equal to 95 percent had increased by more than one-fourth compared with 2001.
“While low down-payment and high payment-to-income products are available today, borrowers generally need good credit scores to qualify,” said Dr. Frank Nothaft, chief economist of CoreLogic. “This may be a factor that has led to the drop-off in applications from those with lower credit scores during the last few years.”
Nothaft noted that one of the consequences of this prolonged trend is that many potential home buyers seem to believe that they cannot qualify for a mortgage.
“When we compare applications to closed loans, what we find is that lenders are originating the bulk of the applications that they are receiving, but the applications that are coming in tend to be from relatively high quality, low-risk applicants,” Northaft said.