If you can't get an Fannie Mae or Freddie Mac loan, you can always try FHA which has lowered standards.
From 2003 through 2006, 82% of Fannie Mae mortgages were for borrowers with a score between 700 and 750, according to data compiled by RBS.
But so far in 2011, only 13% of Fannie Mae mortgages carry that score, and just 1.7% have a score of 700 to 725, according to RBS. This year, 75% of Fannie Mae mortgages are for FICO scores of 750 to 775, up from less than 5% before 2005.
Meanwhile, the median score is 711, according to FICO.
"Half the population is locked out" from the best mortgages, says Mr. Reiter.
The upshot is that borrowing costs more even with a 730 score and a 20% down payment, says Norman Calvo, president of Universal Mortgage in Brooklyn, N.Y.
Three years ago, if you had 730 it was excellent," Mr. Calvo says. Today, he says, it could cost an extra 0.125 percentage point per year on a mortgage, "just because you have one little nick on your credit report."
For more typical scores, the premiums are even bigger. At 700 to 725, it's usually an extra quarter percentage point, and at 630 -- if a borrower can find a loan -- the additional cost is 1.5 percentage points, Mr. Calvo says. "If you have a credit score of less than 680, you've got to be worried about approvability."
If you don't qualify, then you have to get an FHA loan, and FHA is lowering the amount they lend on October 1, 2011. In addition, FHA and HUD will probably have budget cuts and FHA might be in financial trouble.
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