Did you know why one third of Americans can’t buy a home?
No its not always a down payment issue. Many people have fifteen to twenty percent down but can’t get a lender to call them back.
No it also is not that one third don’t have the income ratio to buy something they can afford. They have the income.
Yes. It is poor credit. They have credit below 620 points.
Zillow has an interesting study/survey that came out as a report. They have a mortgage quote part to their website so they can track this data and it is very revealing.
They analyzed more than 24,000 quotes for loans and requests on Zillow Mortgage Marketplace in September of 2010 and found that borrowers with credit scores under 620 who were seeking a 30-year fixed, conventional loan were unlikely to receive even one loan quote, even if they offered a down payment of 15 to 25 percent!!!!
Again, they had jobs, they can put down up to 25 percent and the ratios were fine and it is still not enough.
Why is this important? Nearly one-third of Americans, or 29.3 percent have a credit score lower than 620 according to Bob Adolfson of Lincoln Mortgage, “this locks out nearly a third of all Chicagoans and Americans to getting a loan.”
Miguel Chacon a top selling Broker in Chicago for Better Living Realty is upset at this trend, “A third of Americans are locked out of owning a home, but less than half qualify for the best rates. Wort part about it is that prices are amazingly low right now so they are also locked out if the best housing opportunity in thirty years.”
Adolfson added that, “The lowest interest rates now go to mortgage borrowers with high credit. That is the45% of Americans with credit scores of 720 or above.”
Upon learning this I found a another Zillow report with more information on this. During the first half of September, borrowers with credit scores of 720 or above got an average low annual percent-age rate (APR) of 4.3 percent for conventional 30-year fixed mortgages.
Interest Rate Rises As Credit Score Drops .12 of a percent costs 6400 over life if a 310,000 loan!!
Alternatively mid-range credit score persons in the 620 and 719 got APRs between 4.73 and 4.44 percent! Quite a difference.
Zillow says those with credit scores below 620 received too few loan quotes to even calculate the average low APR.
For each 20-point credit score increase, the average low APR declines 0.12 percent, according to Zillow.
Dr. Alejandro Padilla, an agent at Better Living Realty added, “We are talking real money. For just a .12 (twelfth of a percent) percent change down in interest on a $310,000 home, with a 20 percent down payment, that equates to a savings of over $6,300 over the life of a 30-year loan.”
Chacon added, “For the Market to recover, we need demand to come back. Buyers don’t come back until the markets recover. We are all eager for that to happen.”