According to data from the most recent Origination Insight Report by Ellie Mae, the average FICO® score on closed loans reached 753 in February. As lending standards have tightened recently, many are concerned over whether or not their credit score is strong enough to qualify for a mortgage. While stricter lending standards could be a challenge for some, many buyers may be surprised by the options that are still available for borrowers with lower credit scores.
The fact that the average American has seen their credit score go up in recent years is a great sign of financial health. As someone’s score rises, they’re building toward a stronger financial future. As more Americans with strong credit enter the housing market, we see a natural increase in the FICO® score distribution of closed loans, as shown in the graph below:
If your credit score is below 750, it’s easy to see this data and fear that you may not be able to qualify for a mortgage. However, that’s not always the case. While the majority of borrowers right now do have a score above 750, there’s more to qualifying for a mortgage than just the credit score, and there are still options that allow people with lower credit scores to buy their dream home. Here’s what Experian, a global leader in consumer and business credit reporting, says:
There’s no doubt a higher credit score will give you more options and better terms when applying for a mortgage, especially when lending is tight like it is right now. When planning to buy a home, speaking to an expert about steps you can take to improve your credit score is essential so you’re in the best position possible. However, don’t rule yourself out if your score is less than perfect – today’s market is still full of opportunity.
Bottom Line: Don’t let assumptions about whether your credit score is strong enough put a premature end to your homeownership goals. Let’s connect today to discuss the options that are best for you.
The real estate market was on fire during the second half of 2020. Buyer demand was way up, and the supply of homes available for sale hit record lows. The price of anything is determined by the supply and demand ratio, so home prices skyrocketed last year. Dr. Lynn Fisher, Deputy Director of the Federal Housing Finance Agency (FHFA) Division of Research and Statistics, explains:
“House prices nationwide recorded the largest annual and quarterly increase in the history of the FHFA Home Price Index. Low mortgage rates, pent up demand from homebuyers, and a limited housing supply propelled every region of the country to experience faster growth in 2020 compared to a year ago despite the pandemic.”
Here are the year-end home price appreciation numbers from the FHFA and two other prominent pricing indexes:
The past year was truly a remarkable time for homeowners as prices appreciated substantially. Lawrence Yun, Senior Economist at the National Association of Realtors (NAR), reveals:
“A typical homeowner in 2020, just by being a homeowner, would have accumulated around $24,000 in housing wealth.”
What will happen with home prices this year?
Many experts believe buyer demand will soften somewhat as mortgage rates are poised to bump up slightly. Some also believe the inventory challenge will ease as more listings come to market this year.
Based on this, most forecasters anticipate we’ll see strong appreciation in 2021 – but not as strong as last year. Here are seven prominent groups and their projections:
Bottom Line: Home price appreciation will be strong this year, but it won’t reach the historic levels of 2020. Let’s connect if you’d like to find out what your house is currently worth in our local market.
Katie Tedesco is a FULL-TIME REALTOR® with Watson Realty Corp.