Research Shows 32% of People With Bad Credit Couldn’t Get Mortgages in 2017
Shopping for a home is oft regarded by many as a pleasurable enterprise. However, with all the excitement, comes a little gloom. While checking out properties seems is a sure fire way to boost morale, there’s always the odd chance of one’s loan application getting denied.
While the research paints a grim picture, reality sets in upon the realization that this number pales in comparison to other like-minded stats. The Observed Denial Rate stands at 11%, without taking into account the considerable shifts in applicants undergo when it comes to reviewing their credit profiles.
These findings were backed up by the Urban Institute Housing Finance Policy Center. The organization makes utility of data available to the public and filters it through data provided by CoreLogic to compute the Real Denial Rate (RDR). In normal circumstances, the Observed Denial Rate (ODR) is computed from governmental data as per the Home Mortgage Disclosure Act.
The Housing Finance Policy Center (HFPC) enhances the process further by taking into account a number of variables including applicant credit differences in order to get a crisp picture of subjects under review when it comes to the approval and dismissal of mortgages. The HFPC’s findings have conclusively discovered that the RDR typically hikes to 52% for mortgages that are well below $70,000. Mortgages in this cluster are tagged as “small dollar mortgages.”
Contrary to popular belief, choosing an inexpensive home is not going to improve consumers chances of landing a mortgage loan. The HFPC has categorically stated that small dollar mortgages are found aplenty in non-governmental organizations. They also mentioned that such loans tend to have higher Real Denial Rates.
From a stats perspective, the number of low-credit applicants didn’t change too much when one considers the mortgage size. Effectively, this indicates that low-credit applicants were applying for varied mortgage sizes. Fascinatingly, 34% of applicants for small dollar loans were discovered to have substantially low credit. This number is comparatively large in the larger frame of this and represents about 30% when taking into account mortgages that rank above $150,000.
These numbers are scary for individuals seeking to become homeowners in the near future. As per the Housing Finance Policy Center, applicants are grouped according to their credit capabilities. This means that those with high-credit exist in a different class compared to those with low-credit. The classification is one according to the applicants’ mortgage type, Loan to Value (LTV) ratio, the credit score, the documentation type and the Debt to Income (DTI) ratio.
From this, we can conclusively see that the most successful applicants deposited about 22% of the asking fee. This number represents a considerable margin above the standard 20%. In essence, the mortgage loans were significantly diminutive, about 30% less than their incomes. This number is usually used as the gold standard when it comes to affordability.
The information provided by HFPC highlights the essence of individuals understanding the various factors that contribute to their credit scores. In recent years, there have been a number of people who have voiced concerns about credit scores being inefficient. The argument was that compared to other cash-flow metrics, credit scores were not reliable in determining which individuals were best poised to receive loans.
Despite the criticism, credit scores still matter. Recent advancements in technology mean that it’s now easier than ever for people to monitor their credit and implement strategies to keep their numbers high enough. There are numerous credit score apps and website that generate free credit reports.
More in Loans & Mortgages
This is What Former Baseball Star Alex Rodriguez is Doing to Prepare For His Upcoming Union With Jennifer Lopez
Months into their engagement, former New York Yankees player Alex Rodriguez and singer-actress Jennifer Lopez have been busy settling their affairs...July 1, 2019
You Won’t Believe Which Body Parts Mariah Carey Insured for a Whopping Total of $70 Million
Mariah Carey is one of pop music’s most celebrated performers. Beginning her successful music career in the late 80s, the now...July 1, 2019
CEOs vs Celebrities: Who Really Makes More Money?
It’s no secret that being a CEO and a celebrity brings in the big bucks. With multimillion-dollar deals and huge payouts,...July 1, 2019
The Crazy Story About How Comedian Katt Williams Allegedly Lost $59 Million of His Fortune
It’s ironic how it’s actually comedians, whose job is making other people laugh, that usually tend to live troubled and unhappy...July 1, 2019
Here’s Why These Nuns and Katy Perry Are Fighting Over Multi-Million Dollar Former California Convent
Katy Perry has been involved in quite a few controversies throughout her career as a pop star. But none of them...June 30, 2019
Rihanna is Living Her Best Life With Billionaire Boyfriend Hassan Jameel — Here’s Proof
Rihanna has surely gone a long way from her humble beginnings in her home country of Barbados. Not only is she...June 30, 2019
Gayle King Signs a Huge Contact with CBS, And You Won’t Believe How Much She’s Being Paid!
The renowned TV host, Gayle King, has knocked the ball out of the park with her recently CBS renewed contract that...June 29, 2019
The Amazing Story of How Will Smith Became a Real Life ‘Fresh Prince’ With an Expansive Real Estate Portfolio
Will Smith has had one of the most interesting career tracks in Hollywood. Starting out as a rapper donning the name ‘The...June 23, 2019
Experts Say That You Can Never Succeed in Business If You Do This
Everyone wants to be a successful businessman, but over time, we notice that some people have a better chance at being...June 23, 2019