The U.S. economy has improved since the 2008 crash and mortgage applications, especially for refinancing, have increased over the past year. The average person, however, still has difficulty getting a mortgage. This information comes from a recent report on mortgages by the Federal Reserve Bank of New York. The report shows that mortgages declined during the second quarter of 2016, dropping $39 billion from the first quarter.
While mortgages decline, the average credit score needed to impress lenders has not. The report shows that the average credit score for successful mortgage applications made during Q2 was 756, which is more than 50 points above the national average of 695. The average of 756 is higher than it was in the pre-financial crisis, although lower than in periods during 2009 and 2011.
Why do lenders insist on such high credit scores? One issue is that both Freddie Mac and Fannie Mae responded to the housing crash with several aggressive moves. They stipulated that lenders must buy back mortgages that had faulty underwriting. To avoid a repeat of this position, lenders are wary about who they will lend to now.
Another issue is that while the economy has been improving, the average income has remained steady. Those in the category of "the average American" have little extra income, making it difficult for lenders to see them as profitable customers.
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