Remember when you could get any kind of a loan that you wanted if you had a credit score of 700?  Now, the average credit score for the loans made in the last six months was 750.  When you consider that the highest possible credit score is 850, you can see how incredibly high this is.  It is even more astounding when you consider that the average credit score required to get a loan increased by 10 points in the last six months.  Many people thought that the problem with the real estate market is that the lenders would not provide loans for anyone to buy a home.  Now you have the statistics to prove it.

Did you think the credit score was the only stringent requirement?  Remember when a 20% down payment was plenty to get any loan.  The average down payment for approved loans in the last six months was 24%, which increased 3% in the last six months. 

The other factor in making a loan is the debt to income ratio i.e. the amount of your fixed debts divided by your income.  For decades, you looked for a "front end" ratio of 28% and a "back end" ratio of 36% to 50%. Front end is household expenses and back end is total fixed debts including credit cards.  So, what do you need to get a loan now?  An average front end ratio of 23% and a back end ratio or 34%.  To visualize this, the total debt of the average approved borrower is about one third of their income.  In other words, you need to have two thirds of your income that you can save.  

So, with these nearly perfect applicants, the lenders could process them quickly, right?  After all, it used to be normal to be able to get a loan fully processed in 30 days.  Now it takes 44 days, and the time to get the loan approved increased by 10% in the last six months.

What did it take to get your loan turned down?  The average credit score of someone rejected was 699 i.e. one point below what used to give you any loan you wanted.  To get turned down, your down payment averaged 17% and your debt to income ratios of 27% and 43%. 

The Origination Insight Report by Ellie Mae gives the statistical information needed to answer the question "Why is the real estate market failing to improve even though home prices are low, interest rates are at record lows, employment is increasing and more people are moving to the area?"  The asnwer is that lenders are not loaning to mere mortals, they only loan to the super humans. 

So, you can not only thank the lenders for getting us into this mess, but for keeping us there.