According to data from the Urban Institute, a Washington DC-based think tank that conducts economic and social policy research, borrowers from the following cities can qualify for a home mortgage with lower average FICO scores and lower down payments:
- Detroit, Michigan – Average FICO score: 728
- Miami, Florida – Average FICO score: 732
- Cleveland, Ohio – Average FICO score: 733
- Las Vegas, Nevada – Average FICO score: 735
- San Antonio, Texas – Average FICO score: 736
Though borrowers in these cities may qualify with lower credit scores, they’ll often have to pay more to make up for the higher credit risk their lower scores represent to lenders. "For higher credit risk borrowers with lower FICO and low down payment, the lender will tend to compensate by charging a higher rate," noted Bing Bai, a researcher at the Urban Institute.
Additionally, as lower-income borrowers tend to have more modest savings, the average down payment is lower in Detroit than in more upmarket cities, like San Francisco and San Jose. Not surprisingly, the average loan-to-value (LTV) ratio (which is the amount a lender is willing to approve as a share of the total value of the home), is highest in Detroit.
Listed here are the average loan-to-value ratios in the top 5 cities:
- Detroit, Michigan – 90%
- Miami, Florida – 84%
- Cleveland, Ohio – 88%
- Las Vegas, Nevada – 88%
- San Antonio, Texas – 90%
Despite a robust demand for mortgages, lenders aren’t willing to ease credit, reveals the latest Mortgage Lender Sentiment Survey from Fannie Mae. While credit standards have loosened somewhat over the last few years, it’s still much harder for the average borrower to qualify for a mortgage than during the pre-recession boom years.
While it’s tough to get a mortgage if you have a less than ideal credit score, your chance of getting your application approved also depends on where you live.