Tight mortgage rules now demand flawless credit for homebuyers
A Pew Charitable Trusts study finds that stricter post-crisis lending standards are forcing many prospective buyers, especially those with moderate credit scores, to have near-perfect credit histories.
According to a recent Pew Charitable Trusts report, the tighter mortgage-lending standards introduced after the Great Financial Crisis have succeeded in cutting delinquency rates to just 4-5%, but they have also made it far harder for many Americans to qualify for a loan. Borrowers with credit scores in the 600-699 range saw their share of new mortgages drop from a higher level to 22.3% by 2024, a decline of 13.3 percentage points, while those with scores above 700 captured an additional 24.9 points.
The study highlights that the new rules favor applicants with long, pristine credit histories, sidelining younger, lower-income, rural, Black and Hispanic buyers. At the same time, the benchmark 30-year fixed rate rose to 6.76%, and the National Association of Realtors reported a 2% decline in existing-home sales from the previous month, marking the third straight monthly drop. Economists predict mortgage rates could soon exceed 7%, further dampening market activity.
Why it matters
Stricter loan rules limit homeownership for large segments of the population, deepening housing affordability challenges.
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