Nearly one-third of Americans are unlikely to qualify for a mortgage because their credit scores are too low, according to an analysis of more than 25,000 loan quotes and purchase requests on the Zillow Mortgage Marketplace during the first half of September.
Borrowers with credit scores under 620 who requested purchase-loan quotes for 30-year fixed, conventional loans were unlikely to receive a single loan quote on the Zillow Mortgage Marketplace, even if they offered a relatively high down payment of 15% to 25%, Zillow says.
Nearly one-third of Americans, or 29.3%, has a credit score this low, according to data provided by myFICO.com.
‘We are in an era of historically low mortgage rates, reaching levels not seen in decades,’ says Zillow Chief Economist Stan Humphries. ‘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.’
Meanwhile, the lowest interest rates went to mortgage borrowers who were among the 47% of Americans with excellent credit scores of 720 or higher.
In the first half of September, borrowers with credit scores of 720 or higher got an average low annual percentage rate (APR) of 4.3% for conventional 30-year fixed mortgages. Borrowers with mid-range credit scores between 620 and 719 received APRs between 4.73% and 4.44%, with the APR rising as the credit score drops.
Those with credit scores below 620 received too few loan quotes to calculate average low APR, Zillow says.