Mortgage lenders loosening credit standards, taking more risks

October 3, 2017 - 2 min read

Mortgage lenders want you!

If new data from CoreLogic is accurate, now may be a better time than ever to get a mortgage—especially if you don’t have picture-perfect credit.

According to the analytics firm, mortgage lenders got a bit more aggressive over the course of 2017, with the CoreLogic Housing Credit Index (HCI) rising both over the quarter and the year.

And if recent trends continue, buyers may find it even easier to get a mortgage over the coming months.

Risky business

According to CoreLogic’s Q2 2017 report, which was released late last week, the HCI rose 20 points since Q2 last year, jumping from 97 to 117—its highest point since 2014. A rise in the HCI indicates that mortgage lenders are loosening credit standards and taking more risk in who they offer loans to, spelling good news for on-the-fence buyers.

But despite the uptick in risk, CoreLogic maintains that Q2’s HCI is “still within range of the HCI for the period of 2001 to 2003, a timeframe that is considered to be a normal baseline for credit risk.”

Still, history repeats itself. The HCI has risen steadily over the past two quarters. If that trend continues, it may put CoreLogic’s risk index out of that baseline range in the not-too-distant future.

According CoreLogic’s Chief Economist Frank Nothaft, “Mortgage risk for new originations increased modestly in the second quarter of 2017. Despite the somewhat higher risk of new origination loans, purchase mortgage underwriting remains relatively clean with an average credit score of 745 and low delinquency risk.”

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Give them credit

The average credit score of mortgage borrowers for Q2 2017 was 745—a nine-point jump since that same time 2016. Overall, borrowers with a credit score under 640 comprised only 2 percent of all buyers during the period.

Hawaii-based buyers had the average highest credit score at 756. Other top states in terms of homebuyer credit scores include:

  • California (751)
  • Colorado (750)
  • New York (750)
  • Oregon (750)
  • Virginia (750)

Mississippi homebuyers had the lowest FICO score for the quarter, with an average score of 728.

What are today's mortgage rates?

As lenders loosen the reins on borrowing standards, buyers with less-than-stellar credit finally have the chance to get their foot in the homeownership door. Want to do just that? See what mortgage rates you qualify for today.

Time to make a move? Let us find the right mortgage for you

Aly J. Yale
Authored By: Aly J. Yale
The Mortgage Reports contributor
Aly J. Yale is a mortgage and real estate writer based in Houston who has contributed to Forbes and worked for organizations such as The Dallas Morning News, PBS, NBC, and Radio Disney.