Lower FICO-score requirements allow lenders to attract first-time homebuyers
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Average credit scores of millennial homebuyers who closed loans in November decreased slightly compared to the year-ago period, but the trend was more noticeable for specific loan types, according to the latest Ellie Mae Millennial Tracker.
As some lenders seek to tap the large pool of potential first-time homebuyers with lower FICO-score requirements, Ellie Mae found that the average FICO score for all closed loans to millennials dropped to 723 during the month from 725 in the year-ago period.
Decreases in average scores were more pronounced for FHA and VA loans. A closed FHA refinance loan to a millennial borrower had an average FICO score of 669 in November, dropping from 678 in November 2016. Millennials who closed on a VA refinance loan in November had an average FICO score of 710, declining year over year from 725.
Comparatively, borrowers of all ages who closed loan in November had an average FICO score of 722, also decreasing from the 728 average score in November 2016.
“With the average credit score dipping, lenders are extending credit to borrowers who may have had no previous access to the housing market,” said Joe Tyrrell, executive vice president of corporate strategy at Ellie Mae. “While these scores are still significantly above the levels seen a few years ago, it is encouraging to see increased accessibility, especially as the millennial population continues to pursue home ownership.”
During the month, millennial borrowers continued to prefer conventional loans, which was the most popular loan product at 66% of all closed loans. For the second straight month, FHA loans made up 30% of overall activity. VA loans accounted for 2% of all closed loans during the period, while 3% were undisclosed.
Related stories:
Millennial men receive higher home loans than women
Low interest rates lead millennials to refinance
As some lenders seek to tap the large pool of potential first-time homebuyers with lower FICO-score requirements, Ellie Mae found that the average FICO score for all closed loans to millennials dropped to 723 during the month from 725 in the year-ago period.
Decreases in average scores were more pronounced for FHA and VA loans. A closed FHA refinance loan to a millennial borrower had an average FICO score of 669 in November, dropping from 678 in November 2016. Millennials who closed on a VA refinance loan in November had an average FICO score of 710, declining year over year from 725.
Comparatively, borrowers of all ages who closed loan in November had an average FICO score of 722, also decreasing from the 728 average score in November 2016.
“With the average credit score dipping, lenders are extending credit to borrowers who may have had no previous access to the housing market,” said Joe Tyrrell, executive vice president of corporate strategy at Ellie Mae. “While these scores are still significantly above the levels seen a few years ago, it is encouraging to see increased accessibility, especially as the millennial population continues to pursue home ownership.”
During the month, millennial borrowers continued to prefer conventional loans, which was the most popular loan product at 66% of all closed loans. For the second straight month, FHA loans made up 30% of overall activity. VA loans accounted for 2% of all closed loans during the period, while 3% were undisclosed.
Related stories:
Millennial men receive higher home loans than women
Low interest rates lead millennials to refinance
