The Hilton Head Homes Blog

You can go places with good credit---and Hilton Head Island is a great place to be! Today’s mortgage finance market is all about credit for the best.  According to Bloomberg News, 2016 Q1 numbers from the Federal Reserve Bank of New York’s consumer credit panel, 58% of the $389 billion in mortgage originations (or 51% of the total loans) went to those with an Equifax Risk Score of 760 or higher on a scale of 280 – 860. During the same quarter in 2004, the prime group received 23% of the mortgages.

Borrowers whose score fell within the range of 620 to 659, viewed by lenders as below-prime credit, received just 4.6% of the dollar volume of mortgages for 2016 Q1. This group comprised 6% of purchase mortgage applications during the first quarter of this year, while the same group comprised 29% of the mortgage applications in 2005. The data raise questions as to whether borrowers without prime credit have just given up owing a home for now, given the fact that rising home values (up 32% from 2012 lows) which also require higher down payments and larger monthly mortgage payments may be the reason for the low number of applications. Another reason may be that of the 7 million Americans who experienced foreclosure from 2004 – 2015, less than half had repaired their Vantage credit scores to bring them above 620, which is the baseline for mortgage qualification today.  The real kicker? Of those 7 million, 69% still had foreclosure on their credit, which precludes them from getting back into the traditional mortgage market.

This is not to say the rich are getting richer and the poor are getting poorer.  It is to say, however, that good credit is critical and while lenders are re-introducing incentive programs and (slightly) loosening underwriting standards, requirements are still far tighter than pre-crisis standards. The real estate market took a real hit and we are still paying for it, but for those who have navigated the choppy waters, kept their wits, steered clear of obstacles and been steadfast about their credit and finances, clear skies and smooth sailing is ahead.  Power on! Hilton Head is just a bridge away from it all.