Average Credit Score for Mortgage Limiting Market, NAR Laments
The National Association of Realtors reported that the sale of existing homes rose 3.7% in March 2011 over existing home sales in February, but the association estimated sales would be stronger if more consumers were not shut out of the mortgage market.
“Existing-home sales have risen in six of the past eight months, so we’re clearly on a recovery path,” said NAR Chief Economist Lawrence Yun. “With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain – primarily because some buyers are finding it too difficult to obtain a mortgage. For those fortunate enough to qualify for financing, monthly mortgage payments as a percent of income have been at record lows.”
The association reported that its home affordability index indicates that the principal and interest payment for a mortgage on a median priced home is only 13% of gross household income, a record low percentage, the association noted.
But while homes are more affordable once purchasers get a mortgage, qualifying for the mortgage loan has become significantly more difficult, NAR said.
NAR pointed at data from Fannie Mae and Freddie Mac which showed that the average mortgage credit score rising to about 760 in the current market from nearly 720 in 2007.
For FHA loans the average credit score has moved to around 700, up from just over 630 in 2007, NAR said.
“Although home sales are coming back without a federal stimulus, sales would be notably stronger if mortgage lending would return to the normal, safe standards that were in place a decade ago – before the loose lending practices that created the unprecedented boom and bust cycle,” Yun said.
“Given that FHA and VA government-backed loan programs turned a modest profit over to the U.S. Treasury last year, and have never required a taxpayer bailout, we believe low-down payment loans should continue to be available for those consumers who have demonstrated financial responsibility and are willing to stay well within their budget. Raising the down payment requirement would unnecessarily deny credit to many worthy middle-class families and veterans,” Yun added.