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Average Credit Scores for Approved Mortgages [Charts & Tables]

Home Loans UPDATED ON May 7, 2017 BY Tony Mariotti
Average Credit Scores for Approved Mortgages [Charts & Tables]

Average FICO Scores by Mortgage Program

“What credit score do I need?” I’m asked this all the time. What I think people are really asking is: “What are my chances of getting approved?” There are two ways to approach the answer. First, I can tell folks the minimum credit scores for each major loan program. Second, I can show people the average credit scores for recently closed loans. I like both approaches, but the latter is interesting because a) there’s publically-available data to look at, and b) the data shows loans that have actually been approved. So, none of it theoretical, it’s real.

Here’s what I mean. The table below shows the average credit scores (FICO) for recently-approved home loans. In it, you can see a side-by-side comparison between purchases and refinances among three popular mortgage programs.

AVERAGE MORTGAGE FICO SCORES

RefinancePurchase
FHA654686
Conventional747754
VA712708

While FHA loans allow credit scores as low as 580; you can see that the averages are considerably higher than the minimum requirements.

And credit scores for FHA loans are lower than their VA or Conventional counterparts. That makes sense because FHA loans are designed to make it easier for first time homebuyers to qualify; program guidelines are more forgiving toward borrowers with less-than-perfect credit.

Conversely, average credit scores for conventional loans are higher, which falls in line with our expecations because conventional guidelines require them.

But we can slice and dice the data to go deeper.

Average FICO Scores for Purchases and Refinances

Credit score averages only tell part of the story. More insight is revealed by plotting credit score ranges on a chart.

Perhaps your score is 650, 680 or 720? Or maybe your score is much higher, say 750 or even over 800? To find out where these FICO scores fall, we’ll plot market data published by EllieMae, whose underwriting software processes 70% of the residential mortgages in the United States. No doubt, that’s a huge and reliable data set.

Below, credit scores are grouped into 7 “buckets,” or ranges. First, let’s compare FICO scores purchases and refinances.

Purchase vs. Refinance Credit Score Distribution

average credit scores home purchases

The home purchase credit scores above set the baseline for comparison to refinances below.

average credit scores home refinance

As you can see, credit scores for refinances skew higher (weighted more toward the columns on the right-hand side) than purchases. This makes sense because existing homeowners — who responsibly make their payments on-time and in-full — add to the strength of their financial profile, resulting in better credit scores. By the time they refinance, they should have FICO scores.

Conventional vs. FHA Credit Score Distribution

Now let’s compare average credit scores between Conventional and FHA loan programs.

average credit scores fha loans

The FHA average credit score distribution above shows that most closed loans have scores roughly in the middle, the 650-699 range. Note that the percentage of FHA approvals drops rather steeply below 600 (left-hand side).

average credit scores conventional loans

Wow, it’s pretty obvious that the average credit scores for Conventional loans skew higher than FHA (weighted more to the right-hand side). We’d expect that, given the higher credit standards outlined in conventional loan program guidelines. Far fewer conventional loans are made, than FHA loans, in the 600-649 range.

Average Debt-to-Income (DTI) by Mortgage Program

Here’s a bonus. In addition to the average FICO scores above, we can also compare average debt-to-income (DTI) ratios for approved mortgages.

Side note: if you need a refresher on housing ratios, you can read about how they are calculated and what they mean in this DTI primer.

AVERAGE DEBT-TO-INCOME RATIO

RefinancePurchase
FHA28/4527/42
Conventional24/3624/34
VA24/4024/40

As expected, FHA loans have higher front-end and back-end ratios than the other programs. That because FHA guidelines allow higher debt-to-income ratios than VA or Conventional programs.

When comparing refinances to purchases, across the horizontal rows, the differences are far less drastic.

Average Loan-to-Value (LTV) by Mortgage Program

We have one more data set that will help paint a picture of mortgage approvals, the loan-to-value (LTV) ratio.

Side note: a loan-to-value ratio compares the value of a home to the mortgage taken out against it. A loan of $320,000 taken out on a home worth $400,000 (appraised or sold, whichever is less) is equal to 80% of the home’s value. Or an LTV of 80.

AVERAGE LOAN-TO-VALUE

RefinancePurchase
FHA7996
Conventional6780
VA8798

As expected, refinances sport lower LTVs than purchases. That’s because borrowers have already been paying down the principal on their loan. Meanwhile (in rising markets) the value of the home has also gone up. Those two factors work together to push LTVs down.

And, Conventional LTVs in the table above are lower than other programs. That’s because most borrowers who initially get a conventional mortgage bring higher down payments to the table. Starting with a lower LTV also results in a lower LTV down the road, when the borrower refinances.

Conversely, FHA and VA loan program LTVs are higher. That’s because they require small or no down payments. In fact, FHA requires only 3.5% down and, VA loans are zero down (0.0%) mortgages.

SUMMARY:

Market data from closed loans gives us an excellent way to compare average credit scores among major loan programs. We can also see FICO score differences between purchases and refinances. Knowing how loan approvals work in the real world tells us something about a borrower’s chances of getting approved.

WRITTEN BY

Tony Mariotti

Tony Mariotti

Tony Mariotti is the founder of RubyHome. In addition to helping folks get home loans, he is a sought-after blogger. His favorite topics are online marketing, real estate and mortgages.

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