To buy a house these days, home buyers need more than good credit — they need great credit, according to a new survey from the National Association of Realtors.
If lenders were only a little less picky, home sales and jobs could increase dramatically, according to the professional association.
The Office of the Comptroller of the Currency divides creditworthiness into three categories: prime borrowers, whose FICO credit scores are 660 and above, Alt-A borrowers with FICO scores between 620 and 659 and subprime borrowers, whose FICO scores are below 620.
Last month, 53 percent of mortgage loans went to borrowers with credit scores above 740, according to the realtors group. Meanwhile, the average FICO score for borrowers denied an FHA loan last May was 669.
“There is an unnecessarily high level of risk aversion among mortgage lenders and regulators,” said NAR Chief Economist Lawrence Yun in a release. Yun urged a return to lending standards in force before the recent boom and bust in the housing market. Certainly, the association’s members would benefit if home sales picked up.
According to Yun, re-examining regulatory rules to allow more relaxed, “sensible lending standards” could lead to 500,000 to 700,000 additional home sales in the coming year and 250,000 to 350,000 jobs in related trades and services.