The mortgage market is booming, but getting a home loan approval is as difficult as it has been for years.
Mortgage credit availability, a measure of lenders’ willingness to issue mortgages, is near its lowest level since 2014, according to the Mortgage Bankers Association (MBA).
The tight credit environment shows a widening gap in the mortgage market: more home loans are being made than ever before, but they are almost entirely to borrowers with pristine credit ratings and sizeable down payments. Borrowers with credit qualifications just outside the standout category will find fewer lenders willing to approve their applications. Some of the borrowers who would have qualified for a home loan early last year are now out of luck and are classified as having too high a credit risk.
“Because it is harder to get mortgage credit, the overall environment is more competitive,” said Dr. Lawrence Yun, Chief Economist at the National Association of Realtors.
Around 70% of mortgages issued in 2020 went to borrowers with a credit score of 760 or more, up from 61% in 2019, according to the Federal Reserve Bank of New York.