By KENNETH R. HARNEY
Are mortgage lenders finally loosening up a little on their credit score requirements — opening the door to larger numbers of home buyers this summer and fall?
It depends on what type of loan you’re seeking. If it’s a Federal Housing Administration-insured mortgage, the answer is a resounding yes. The average FICO credit scores for approved applicants for FHA home purchase loans have been dropping steadily this year, according to new data from Ellie Mae, a Pleasanton, Calif., company whose mortgage origination software is used by most large lenders.
But if you’re shopping for financing in the much broader conventional market — where most mortgages are bought or guaranteed by giant investors Fannie Mae and Freddie Mac — scores have not budged for months. FICO scores averaged 755 in June, the same as in January, 4 points below their average for all of 2013. FICO scores run from 300 to 850; higher scores indicate lower risk of default.
Though credit scores represent just one factor that lenders use in determining whether to grant an applicant a mortgage, today’s average scores required of borrowers are far above historical norms and represent a high hurdle for many would-be purchasers — especially first-time, minority and moderate-income buyers.