Mortgages unattainable for a third of Americans

Almost a third of Americans are unable to qualify for a mortgage, an essential step to moving for most people.

Low credit scores severely restrict many Americans' abilities to qualify for a mortgage, according to an analysis of loan quotes and purchase requests by Zillow.com. About 29.3 percent of Americans have a credit score of 620 or below, said the website, citing FICO data. Borrowers with a score that low who were shopping for a 30-year fixed-rate mortgage were unlikely to receive even one loan quote on Zillow.com's mortgage marketplace.

Even if they could qualify for a mortgage, many Americans would be ineligible for the lowest interest rates, said the report. Low rates overwhelmingly went to the 47 percent of Americans who had credit scores of 720 or above. Meanwhile, borrowers with scores between 620 and 719 had to settle for interest rates well above today's reported low rates.

The report highlighted how important it is to improve one's credit score before moving. The website said that an interest rate drops 0.12 percent for each 20-point credit score increase, which on a $300,000 30-year mortgage, could equate to $6,400 in savings.

Zillow.com's findings could shed a new light on the purported affordability of moving into a new home in today's market. Bankrate.com reports that a 15-year fixed-rate mortgage averages a rate of just 3.96 percent, but many homebuyers might have to pay a rate much higher than that.
 

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