It looks as if some borrowers may find it far easier to obtain mortgage credit this year than they would have just 12 months ago, according to a new report in MSN Real Estate.
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The average credit score for approved mortgages dropped to 727 in December, down from 748 one year prior, according to Ellie Mae, a mortgage technology firm. FICO credit scores run on a scale from 300 to 850.
Forty-six percent of mortgages that closed in December had credit scores above 750. One year earlier, 57 percent of mortgages posted credit scores that high. In December, about 31 percent of loans had credit scores below 700. One year earlier, that percentage stood at 21 percent, according to Ellie Mae.
Debt-to-income ratios are growing. The average total monthly debt for borrowers of closed loans in December stood at 39 percent of their incomes. That’s up from 35 percent in June.
“Rising interest rates and home prices could account for some of the increase in debt-to-income ratios,” MSN Real Estate reports.
More lenders may be getting comfortable easing standards since home prices have been rising over the past year. Also, lenders are facing a big drop in refinance business, which may prompt them to get more competitive in trying to nab more borrowers for home purchases, housing experts say.
However, the effect of new mortgage regulations, which took effect last week, have yet to be seen.
Tighter credit standards may be making for better borrowers, according to a new report. Loans originated last year are performing better than any year since tracking began in 1997, according to a report by Black Knight Financial Services.