Make us your home page
Instagram

The Nation's Housing: Qualifying for a mortgage is getting tougher

On loans, right stuff is getting tougher

WASHINGTON — A new analysis, based on a large sample of mortgage applications approved and denied in recent months, offers benchmarks for anyone thinking about financing a home purchase or refinancing. The study taps into data from the loan processing software used for about one-fifth of new mortgage applications nationwide, supplied by the firm Ellie Mae Inc.

Here's what you would have needed to be among the average successful applicant for a conventional home mortgage in February, the latest month for which data are available:

• A FICO credit score of 764, which is higher than the average for approved loans in November. It's beyond the 620-640 FICOs that Fannie Mae and Freddie Mac once considered the minimum for a conventional prime mortgage, and above the nationwide median FICO score of 711, according to a spokesman for Fair Isaac Corp, developer of the score.

• A loan-to-value (LTV) ratio of 78 percent, signifying a down payment of 22 percent. This is higher than the controversial minimum of 20 percent proposed last year by Obama administration financial regulatory officials who were seeking a standard for "safe" loans offering the lowest available rates and best terms.

• Debt-to-income ratios of 21 percent for housing expenses, 34 percent for total household monthly debt.

Homeowners who refinanced existing conventional loans had the best profiles of all: average 770 FICOs, 65 percent LTVs indicating 35 percent equity stakes, and debt-to-income ratios of 22 percent housing and 32 percent total debt.

The main alternative to conventional financing — the Federal Housing Administration (FHA) — requires smaller down payments, is more generous on credit standards and will stretch further on debt-to-income ratios than Fannie Mae and Freddie Mac, the mainstays of the conventional marketplace.

According to Ellie Mae's data, successful applicants at FHA had average FICO scores during February of 701 and debt-to-income ratios of 28 percent for housing expenses, 41 percent for total household monthly debt. Although FHA accepts down payments as low as 3.5 percent, successful applicants threw in a bit more — an average 5 percent down.

Successful FHA refi applicants had 722 FICOs, 12 percent average equity stakes, and lower debt-to-income ratios than purchasers — 26 percent on average for housing costs, 40 percent for total household debt.

Keep in mind these are averages. Many homebuyers make it through the application with FICO scores and debt ratios that don't meet the current benchmarks — often because their full financial and credit-risk pictures are good enough to get them accepted by Fannie Mae's or Freddie Mac's automated underwriting systems.

The Nation's Housing: Qualifying for a mortgage is getting tougher 04/14/12 [Last modified: Saturday, April 14, 2012 4:30am]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Washington Post - Writers Group.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. Black entrepreneur says city stiffing him on project after he endorsed Rick Baker

    News

    ST. PETERSBURG — A prominent African-American resident says his endorsement of mayoral candidate Rick Baker has led city officials to freeze him out of a major construction project along the historic "Deuces" stretch of 22nd Street S.

  2. Sen. Nelson urges FEMA to examine high number of denied flood claims

    Banking

    Sen. Bill Nelson urged FEMA on Tuesday to ensure fairness, proper oversight and transparency in processing Hurricane Irma aid following a report by the Palm Beach Post that 90 percent of Irma claims under the National Flood Insurance Program had been denied.

    Sen. Bill Nelson is calling for FEMA to ensure the flood claims process post-Hurricane Irma is fair and ethical following reports that 90 percent of claims under the National Flood Insurance Program were denied. | [Times file photo]
  3. Amazon expands in Tampa with Pop-Up shop in International Plaza

    Retail

    TAMPA — A new retailer known largely for its online presence has popped up at International Plaza and Bay Street.

    Shoppers walk past the new Amazon kiosk Tuesday at the International Plaza in Tampa. The kiosk, which opened last month, offers shoppers an opportunity to touch and play with some of the products that Amazon offers.
[CHRIS URSO   |   Times]

  4. Study: Florida has fourth-most competitive tax code

    Banking

    Florida's tax code is the fourth most competitive in the country, according to a study released Tuesday by nonprofit group Tax Foundation.

    Florida has the fourth-most competitive tax code, a study by the Tax Foundation said. Pictured is  Riley Holmes, III, H&R Block tax specialist, helping a client with their tax return in April. | [SCOTT KEELER, Times]
  5. Trigaux: On new Forbes 400 list of U.S. billionaires, 35 now call Florida their home

    Personal Finance

    The latest Forbes 400 richest people in America was unveiled Tuesday, with 35 billionaires on that list calling Florida home. That's actually down from 40 Florida billionaires listed last year when a full 10 percent listed declared they were Floridians by residence.

    Edward DeBartolo, Jr., shopping center developer and  former San Francisco 49ers Owner, posed with his bronze bust last year during the NFL Hall of Fame Enshrinement Ceremony in Canton, Ohio. DeBartolo remains the wealthiest person in Tampa Bay according to the Forbes 400 list released Tuesday. 
[Photo by Joe Robbins/Getty Images]