Buyers Need Higher FICOs but Get by with Lower Down Payments

Very few home buyers with credit scores below 620 are getting mortgages these days and but more are putting down less than 20 percent.

The percentage of buyers putting less than the standard 20 percent is at the lowest level in nearly a year, according to the February Realtor Confidence survey conducted by the National Association of Realtors. Some 32 percent are putting down 20 percent or more, down from 34 percent in January and 36 percent in December.

For those with good credit and access to programs like FHA, down payment requirements are lessening. Approximately 64 percent of buyers with a mortgage are putting down less than 11 percent, according to the survey.

The survey found that prospective home buyers had difficulty in qualifying for a loan. A comparison of FICO scores for transactions as reported by Realtors responding to the survey compared with FICO scores reported by Fannie Mae’s “Acquisition Profile by Key Product Features” shows that credit availability to lower scoring applicants seems to have declined since the Fannie Mae data in 2001-2004.

Very few, 1 or 2 percent, of Realtors reported buyers with less than a 620 score could get a loan, while about 8 percent with scores between 620 and 660 could get a loan. Some 15 percent with scores between 660 and 700 got a loan compared to 18 percent in the Fannie Mae data.