Sponsored Content from CreditXpert: Maximize Credit Potential for All
The Mortgage Credit Potential IndexTM (MCPI) is a monthly reporting of mortgage credit inquiries analyzed by CreditXpert’s predictive analytics platform. (Read the full press release here.) The MCPI highlights the volume of mid-score mortgage credit inquiries by 20-point credit bands between 360 and 850. When compared to prior months and years, the MCPI serves as an indicator of changes in query volume.
The MCPI also leverages CreditXpert’s proprietary predictive analytics engine to highlight the potential increase each applicant may be able to achieve within 30 days if they completed a custom action plan that is generated by CreditXpert’s proprietary predictive analytics engine, based on the initial credit inquiry for each applicant. Highlighting this increase potential will help mortgage lenders better understand how they may be able to help their broader applicant pool qualify for a mortgage program, or a lower interest rate based upon the applicant’s mid-score.
12-Month Inquiry Volume
In the 12 months ending December 31, 2021, CreditXpert analyzed 24.2 million mid-score credit inquiries. This represents a slight increase of 4% over the 12 months ending December 31, 2020. That said, volume varied throughout the year and saw a softening in later months of the year.
CreditXpert found that 71% of all mid-score inquiries below 760 may be able to increase their score by at least one 20-point band within 30 days if they complete a custom action plan.
CreditXpert action plans are tools meant to educate mortgage professionals and prospective consumer loan applicants, and are not furnished for the purpose of improving an applicant’s credit record, credit history, or credit rating, or removing or modifying adverse, inaccurate, fraudulent, or other information in an applicant’s credit record. CreditXpert is not a credit counseling, credit repair, or credit reporting agency. Credit scores and score changes from CreditXpert are estimates, and will likely differ from credit score information used by mortgage professionals to assess loan eligibility. CreditXpert does not guarantee that scores from any other company will change by the same amount, in the same way, or at all.
Expanding Access to Homeownership
A Federal Housing Administration (FHA) loan is a home mortgage that is insured by the government and issued by a bank or other lender that is approved by the agency. FHA loans require a lower minimum down payment than many conventional loans, and applicants may have lower credit scores, typically 580, than is usually required. The FHA loan is designed to help low- to moderate-income families attain homeownership. They are particularly popular with first-time homebuyers.
The Rural Housing Service (RHS) provides loans directly to low-income borrowers in rural areas and guarantees loans provided by approved lenders. An RHS loan can help a borrower who otherwise might not qualify for a traditional mortgage because of low income or bad credit to buy a home in an approved rural area.
CreditXpert found that 711,000 (52%) of total initial inquiries below 579 may be able to achieve 580 or higher within 30 days if they complete a custom action plan.
CreditXpert was founded to help make homeownership more accessible and affordable to all. Our ability to help those who may not initially qualify for a mortgage achieve a credit score that puts them in a position to qualify for an FHA/RHS mortgage is at the heart of what we are here to do. In the 12 months ending December 31, 2021, CreditXpert analyzed 1,368,681 mid-score credit inquiries below 579. Of these inquiries, 711,064 could increase their score to 580 or higher within 30 days if they complete a custom action plan.
A conventional mortgage is any type of homebuyer’s loan that is not offered or secured by a government entity. Instead, conventional mortgages are available through private lenders, such as banks, credit unions, and mortgage companies. However, some conventional mortgages can be guaranteed by two government-sponsored enterprises: the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Conventional loans typically require a minimum credit score of 620. Loan size must be equal to or less than $647,200 or $970,800 in high-cost areas for a single-family home.
CreditXpert found that 1.37 million (43%) of total initial inquiries below 619 may be able to get to 620 or higher within 30 days if they complete a custom action plan.
In the 12 months ending December 31, 2021, CreditXpert analyzed 3,223,193 mid-score credit inquiries below 619. Of these inquiries, 1,373,266 may be able to increase their score to 620 or higher within 30 days if they follow a custom action plan. There is some double counting in this category, as some that could reach the score generally required for an FHA/RHS mortgage may also better their score enough to qualify for a conventional mortgage.
Increased Purchasing Power
A jumbo loan is a non-conforming mortgage loan that exceeds the limits set by the Federal Housing Finance Agency (FHFA). Jumbo loans are non-conforming loans, as they cannot be purchased, guaranteed, or securitized by Fannie Mae or Freddie Mac. The main advantage of a jumbo loan is that it lets you borrow more than the limits imposed by Fannie and Freddie. Jumbo loans typically require a minimum credit score of between 680 and 700, depending on individual lender guidelines.
CreditXpert found that 1.97 million (39%) of total initial inquiries below 679 may be able to achieve 680 or higher within 30 days if they complete a custom action plan.
With home prices continuing to rise, mortgage lenders know the importance of securing higher levels of funding for their applicants. In the 12 months ending December 31, 2021, CreditXpert analyzed 5,028,132 mid-score credit inquiries below the 680-qualification threshold for a jumbo mortgage. Of these inquiries, 1,974,105 may be able to increase their score to 680 or higher within 30 days if they complete a custom action plan.
According to the Loan Level Price Adjustment tables published by Fannie Mae and Freddie Mac, those with credit scores between 640 and 759 could potentially qualify for a better rate if they increase their score by at least one 20-point band. The Loan Level Price Adjustments are guidelines that are subject to individual lender pricing policies.
CreditXpert found that 6.25 million (68%) of total initial inquiries between 640 and 759 may be able to increase their score by at least one 20-point band within 30 days if they complete a custom action plan.
As interest rate is one of the top criteria that applicants use to select a lender, it will be important for lenders to deliver the most competitive offer. In the 12 months ending December 31, 2021, CreditXpert analyzed 9,187,498 mid-score credit inquiries between 640 and 759 where a 20-point band increase could lead to a lower interest rate. Of these inquiries, 6,252,673 may be able to increase their score by at least one 20-point band with 30 days if they complete a custom action plan.
To see a detailed breakdown with month-over-month comparisons, download the full MCPI here.
The mid-scores analyzed are the FICO® scores requested by a lender and reported by one of the credit bureaus or credit reporting agencies. FICO® is a registered trademark of Fair Isaac Corporation (FICO). CreditXpert is not affiliated with or endorsed by FICO or any of the credit bureaus or credit reporting agencies. CreditXpert trademarks used herein are trademarks or registered trademarks of CreditXpert, Inc. The use of any other trade name, copyright, or trademark is for identification and reference purposes only and does not imply any association with the copyright or trademark holder or their product or brand. Other product and company names mentioned herein are the property of their respective owners.
(Sponsored content includes material submitted independently of the Mortgage Bankers Association and MBA NewsLink and does not connote an MBA endorsement of a specific company, product or service. For more information about sponsored content opportunities, contact Bill Farmakis at firstname.lastname@example.org or 203/834-8832.)