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September 27, 2010

Got a credit score under 620? Good luck getting a loan, Zillow says

If your credit score is under 620, don't expect to get a mortgage until your financial situation improves.

Zillow, the real estate site that also runs a "mortgage marketplace," says few would-be homebuyers with a score in that subprime category get even one loan quote in response to their requests. That's true "even if they offered a relatively high down payment of 15 to 25 percent," the company says.

Nearly three in 10 Americans fall into that under-620 group, Zillow says.

It analyzed 25,000 loan quotes and purchase requests made on the mortgage marketplace in the first half of September.

Here's how quoted rates varied for people with higher credit scores:


Credit Score

Percent of Americans in this category

Non- FHA Average Annual Percentage Rate (APR)



















Source: Zillow


The options for the under-620 crowd were seemingly endless during the peak years of the housing bubble. Now, nada?

The Federal Housing Administration, which insures loans, doesn't actually bar lenders from offering FHA mortgages to people with low scores. (It did announce in January that it would be requiring a 580 score if you're putting down 3.5 percent, and higher down payments mandated for those with lower scores.) But I've frequently heard industry folks say that FHA lenders use 620 as a cutoff even so because they see it as a less risky strategy.

Have you seen any options for under-620 borrowers out there these days?

Should there be?

If you're hoping to increase your credit score, here's a post I wrote about how they work and a companion piece about upping them.


The bummer for most of us with mortgages is home values are not high enough to qualify for a refinance. It's a total bummer. So even if you have good credit, you're crap out of luck.


Further evidence that housing has a lot further to fall. Even if you have a market willing to pay, they cant (and shouldnt)qualify for the loan. Buying and owning a home is a privledge that comes with alot of expenses. As a whole, having a low credit score is indicative of having trouble with financial matters and obligations. This is not usually the profile for someone who would make a good candidate for responsible homeownership. The bigger issue is downpayment. Credit should be looser when the borrower has real skin in the game.

No skin in the game must equal no loan. Plain and simple. Free lunches do not exist.

Good. Sorry to say, but in most cases if you have a credit score below 620 you should not be buying a house. The subprime folks were a major cause of all this mess.

So what's wrong with getting a loan if you are hard up? If you have dough, you don't need a loan in the 1st place. Why shouldn't people be let realize their dreams?

And this "Darwin" is not really funny. More like parodying himself from a year ago.


I found this chart to be very interesting and well....a little unbelievable. Do you know how Zillow sourced this data? I would think there would be far more people below 620 since the unemployment rate stands at 10%. Presumably, with no job, you cant pay your bills. This chart implies that about 29% of the populace is less than 620 score, and 43% is less than 680. This is more bad news for high priced sellers, a topic i have broached before. There is different strata to the dire straights of home sellers. If you are priced below 300k, you have a reasonable chance of selling your home. If you are above, good freaking luck. Elweedz is a 40 year old male homeowner. When i was growing up and even as recently as 1999, considered 300k homes to be for rich people. Guess what? They still are. This is NOT a starter home value. I bought a townhome in white marsh in 1998 for 118k.....and it scared the hell out of me despite my then 80k/year income.

Buying a 300k home currently requires and should require that you have at least 30k in the bank.
10k down payment
10k closing/escrow
10k reserves , 3 months PITI

How many people do you know with that kind of scratch in the bank? And how many of them are ready willing and able to gamble thier life savings on a purchase that could wipe it all out in a year thru home depreciation?

Buyers- dont be embarrased to offer 75% of asking. You are only bidding against yourself.

Zillow says it got the credit-score information from myFICO, run by the Fair Isaac folks, elweedz. I didn't have a moment today to check in with myFICO myself, but I was struck by those numbers as well.

jamie, could it be an issue of MyFICO only having data from people who have pretty good credit, therefore an unrepresentative sample? I'd think that the people that are more likely to pay for a service like MyFICO would tend to have higher credit to begin with?

Chappy10, my impression is that myFICO stats represent the country, not just those who paid for their scores. But I just don't know for sure. Next time I have an opportunity to talk with them, I'll ask.

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About Jamie Smith Hopkins
Jamie Smith Hopkins, a Baltimore Sun reporter since 1999, writes about the regional economy. Her reporting on the housing market has won national and local awards. Hopkins is a Columbia native and has lived in Maryland all her life, save for 10 months spent covering schools in Ames, Iowa.
She trained to become a wonk by spending large chunks of time as a geek and an insufferable know-it-all.
Baltimore Sun articles by Jamie

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