The number of people getting mortgage loans with less-than-stellar credit has steadily grown over the last three years, right alongside those getting loans with excellent credit.
That was the finding of Equifax’s most recent National Consumer Credit Trends Report, which also shows that total mortgages increased in the first quarter of 2016 by 10.3%, home equity lines of credit (HELOCs) increased by 10.2% and home equity installment loans soared by 23.5% to an 8-year high.
New first mortgage accounts to subprime borrowers during the first quarter have “increased on a consistent basis alongside that of prime lending,” the report said, with roughly 95% total mortgages made up of prime loans and 5% subprime.
“The first quarter of 2016 was a strong one for mortgage lending, and underwriting practices appear to have maintained their rigor over the last three years,” said Amy Crews Cutts, chief economist for Equifax. “We anticipate that the second quarter of 2016 will maintain this trend.”
The bottom line is, if you’d like to get a mortgage loan, it’s worth looking into. A mortgage company’s definition of bad credit might not be what a consumer considers it to be. A credit score of 620 or higher is typically required. You can start the process by checking your credit to see where you stand. (You can do that by getting your free credit report summary every month from Credit.com.) Your credit score will also impact the size of your monthly payment. (You can crunch the numbers on how much house you can afford here.)
Keep in mind, buying a home and making on-time payments to your mortgage may cause your score to rise. This improvement, in turn, could help you qualify for a refinancing offer down the road, netting you a lower interest rate and a more affordable monthly payment.
More on Mortgages & Homebuying:
- How to Find & Choose a Mortgage Lender
- How to Refinance Your Home Loan With Bad Credit
- How to Get Pre-Approved for a Mortgage