The National Association of Realtors® announced today that existing-home sales increased 3.7 percent in March from one month earlier, but were still off 6.3 percent from a year ago.
In that release, the NAR also noted that the average credit score for conventional mortgages has tightened, from nearly 720 back in 2007 to 760 today, per data from Freddie Mac and Fannie Mae.
Meanwhile, the average credit score for an FHA loan jumped to around 700, up from 630 in 2007.
So what does this really say?
Well, the NAR highlighted these numbers as a means to argue for lowering down payment requirements, which have risen since the mortgage crisis materialized.
Back then, it wasn’t uncommon to buy a home with no money down, but those days have come and gone – now you’ll need at least 3.5% to purchase a property.
And that number could rise to 10% for certain types of loans, known as “qualified residential mortgages,” pushing mortgage rates on non-exempt loans much higher.
In reality, mortgage lending isn’t necessarily any safer than it was before the crisis.
The higher credit scores are really just a reflection of the type of borrower that has gone to the FHA for financing, as conventional mortgage lenders lost market share.
But the improved credit scores from Fannie Mae and Freddie Mac do point to tighter underwriting guidelines, which should mean fewer missed payments and foreclosures in the future.
Let’s just hope the government doesn’t see that as an excuse to lower down payment requirements or revert back to our old ways.
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