Recently, tightening credit standards have squeezed many prospective borrowers right out of the market, but that may be changing, according to data released Thursday by mortgage technology company Ellie Mae.
According to the company’s latest Origination Insight Report, credit standards loosened in September, giving hopeful homebuyers a little less reason to sweat. Borrowers with credit scores of less than 700 accounted for 32% of closed loans last month, up from only 17% a year ago.
The average credit score for borrowers receiving a mortgage in September was 732, down from 734 in August and 750 in September of 2012. The average credit score of borrowers closing Federal Housing Administration-backed loans was 687, down from 691 in August and 716 in September 2012.
That’s not to say getting a mortgage will be a walk in the park for everyone. The average credit score for those denied a mortgage in September was 696. That’s down from 704 a year ago, but in the pre-financial meltdown era it was common for people with scores in the 600 range or below to be approved for mortgages, according to a MarketWatch report. But with demand for refinancing tumbling 70% since May, many lenders are trying to get more customers through the door.
“It does seem there’s a little bit of an opening that’s going on,” Brad Hunter, chief economist at Metrostudy, told MarketWatch. “Lenders are being more lenient.”