Access to Mortgage Increases

Getting a mortgage is getting easier and markets are inching closer to pre-crisis levels, according to Zillow’s Mortgage Access Index (ZMAI). Now, many borrowers who last year may have only been eligible for FHA loans due to a low credit score or down payment are being offered conventional loans with private mortgage insurance, opening them up to options with more competitive terms and rates.

Mortgage credit availability reached its peak in August 2004, recording an index score of 134.6. Access began to drop over the next several years. Then, in May 2007, both the housing and mortgage availability began a multiple year plunge, leaving home values down more than 22 percent and credit the tightest it had been in years. In September 2010, the ZMAI bottomed out at 9.6. Today, the ZMAI currently sits at 71.5 and access to mortgage credit has improved significantly, and is roughly two-thirds of the way back to the 2002 pre-crisis level of 100.

"The reality of what borrowers are experiencing in the mortgage market does not match the popular narrative. Lenders are, in fact, opening their doors a bit wider, especially for borrowers with credit scores below 700," Zillow Chief Economist, Stan Humphries, said in a press release. "Modestly easier credit will help first-time buyers get into the market, which will have many benefits. Given all the market has been through the past few years, this is a natural place to be in the housing cycle. We're a long way from again letting credit get too loose, but we'll need to remain vigilant not to repeat the mistakes of the recent past."

A high number on the ZMAI means credit is easier to obtain. A lower number means credit is tighter. The ZMAI uses seven variables to measure access to credit. Those variables include: credit score, debt-to-income ratio, privately insured proportion, non-conforming proportion, second mortgage prevalence, mortgage rate spread, and Zillow mortgage quotes ratio. Of those variables, the bottom 10th percentile of credit scores accepted, the prevalence of second mortgages, and the number of quotes on Zillow offered to mortgage inquirers, saw the greatest positive movement in the six most recent months of the ZMAI.