While most people believe that the major factors in qualifying for a mortgage are credit score, credit history, and income, a recent report shows that location may also play a part. The Urban Institute has carried out a study on how location affects mortgages. The results show that where borrowers live can determine the criteria that their application is subject to.
The report showed that, for example, those who live in Detroit only need a credit score of 728 to qualify for a mortgage, but buyers in San Francisco may be denied a mortgage if their score is under 770. These cities represent the low and high ends of the scale created by the institute. The numbers are not absolute but they do represent the average credit score for approved mortgages those cities. In San Francisco, someone may be able to get a loan with a 750 score if they agree to pay higher interest or make a large down payment.
Many lenders are more willing to approve those with lower scores in areas where the housing market is weak. Low-income buyers may be looking to buy, and for lenders, taking on the risk that these borrowers represent becomes more tempting when others are not buying. Lenders are also often willing to approve a higher loan-to-property value ratio in areas with low-income buyers. In Detroit, for example, loans often covered 90% of the property's value.