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Huge Gap in Mortgage Availability: 1/3 of Americans Highly Unlikely to Qualify for a Mortgage Today, While Less Than Half Qualify for the Best Rates

Credit Score Spread Creates Wide Disparity in Mortgage Accessibility And Availability of Historically Low Rates, According to Zillow® Mortgage Marketplace Analysis

Sep 27, 2010

SEATTLE, Sept. 27 /PRNewswire/ -- Nearly one-third of Americans are unlikely to qualify for a mortgage because their credit scores are too low, making homeownership out of reach for many. This is according to an analysis of more than 25,000 loan quotes and purchase requests on Zillow Mortgage Marketplace during the first half of September.

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Borrowers with credit scores under 620 who requested purchase loan quotes for 30-year fixed, conventional loans were unlikely to receive even one loan quote on Zillow Mortgage Marketplace(1), even if they offered a relatively high down payment of 15 to 25 percent. Nearly one-third of Americans, or 29.3 percent, has a credit score this low, according to data provided by myFICO.com.

Meanwhile, the lowest interest rates went to mortgage borrowers who were among the 47 percent of Americans with excellent credit scores of 720 or above.

In the first half of September, borrowers with credit scores of 720 or above got an average low annual percentage rate (APR) of 4.3 percent for conventional 30-year fixed mortgages. Borrowers with mid-range credit scores between 620 and 719 received APRs between 4.73 and 4.44 percent, with the APR rising as credit score drops. Those with credit scores below 620 received too few loan quotes to calculate average low APR.

For those with mid-range credit scores of 620 to 719, improving one's credit score can mean a significant savings in interest over time. For each 20-point credit score increase, the average low APR declines 0.12 percent, which for a $300,000 home, with a 20 percent down payment, equates to a savings of $6,400 over the life of a 30-year loan.

"We are in an era of historically low mortgage rates, reaching levels not seen in decades. Coupled with four years of home value declines, homes are more affordable than we've seen for years. But the irony here is that so many Americans can't qualify for these low rates, or can't qualify for a mortgage at all," said Zillow Chief Economist Dr. Stan Humphries. "Four years ago, in the era of easy-to-get subprime loans, many borrowers with low scores did buy homes, which in turn helped contribute to a housing bubble. Today's tighter credit is a predictable response by banks after the foreclosure crisis, but also keeps a cap on housing demand, which is important for the greater housing market recovery."

Zillow Mortgage Marketplace receives more than 300,000 loan requests each month from borrowers, who can anonymously request mortgage quotes from hundreds of lenders across the country. Lenders then submit loan quotes customized to each borrower's financial situation. This analysis looked at the number of quotes and the average lowest APR for 30-year fixed, conventional mortgages that were quoted to borrowers who intended to purchase a home with down payments between 15 and 25 percent, along with credit score information from myFICO.com.  The analysis took into account more than 25,000 quotes submitted between September 1 and September 15, 2010.

   

Credit Score

Percent of
Americans in this
category

Non- FHA
Average Annual
Percentage Rate
(APR)

 

<620

29.3%

N/A(2)

 

620-639

3.7%

4.90%

 

640-659

4.3%

4.73%

 

660-679

4.6%

4.60%

 

680-699

5.1%

4.56%

 

700-719

6.1%

4.44%

 

>720

47%

4.30%

 
   
     

 

About Zillow Mortgage Marketplace

Zillow Mortgage Marketplace is a free, open, and transparent lending marketplace, where borrowers connect with lenders to find loans and get the best mortgage rates.  Borrowers anonymously submit loan requests and receive an unlimited number of custom mortgage quotes with real rates directly from hundreds of competing lenders.  Zillow Mortgage Marketplace also provides mortgage calculators, mortgage advice, mortgage widgets, and lender directories. In August, Zillow Mortgage Marketplace received more than 314,000 loan requests.  Zillow Mortgage Marketplace is operated by Zillow, Inc., which also operates Zillow.com® and Zillow Mobile.

Zillow and Zillow.com are registered trademarks of Zillow, Inc.

(1) This analysis looked at mortgage requests and quotes between September 1, 2010 and September 15, 2010 and was filtered to only include quotes for conventional 30-year purchase loans where borrowers offered down payments of 15 to 25 percent.

(2) Borrowers with credit scores of 619 or below receive too few loan quotes to be statistically significant and to calculate an average low APR.

SOURCE Zillow Mortgage Marketplace