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October 31, 2014

Data Shows Mortgage Credit Easing, Others Not so Sure

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Data Shows Mortgage Credit Easing, Others Not so Sure

Lenders are showing signs of easing up on underwriting for mortgages, according to the latest report from Ellie Mae Inc., a mortgage origination software company. But some critics say they aren’t seeing it in their markets yet, as their customers continue to struggle to qualify for a mortgage, posing one of the biggest obstacles to the housing recovery. 

Ellie Mae’s latest findings may provide some encouraging signs for those buyers who have been shut out: Credit scores and down payments for approved mortgages are moving lower.

FICO scores for approved mortgages averaged 743, dropping to the lowest point since Ellie Mae began its tracking in August 2011. For the first quarter, the average credit score overall among approved borrowers was 746, which compares to 748 for all of 2012, according to Ellie’s report, which reflects March data of approved mortgages. 

Borrowers approved for a loan made, on average, a 19 percent down payment, the lowest since May 2012, according to Ellie Mae. The front-end debt-to-income ratios were 23 percent. 

Borrowers who were denied a mortgage tended to have, on average, a FICO score of 702, a down payment of 15 percent, and front-end debt-to-income ratio of 27 percent, according to Ellie Mae’s findings. 

Some critics are quick to point out that Ellie Mae’s findings are only a sample of about 20 percent of all loan originations. 

“I warn my clients to be prepared to give their arm, leg, and first-born,” Lakshmi G. Yokoyama, a mortgage consultant at Sierra Pacific Mortgage Corp., told Inman News. 

Source: “Ellie Mae: Mortgage credit continues to ease,” Inman News (April 18, 2013)

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