Homebuyer Credit Scores Hit Multi-Year High

Average homebuyer credit scores soared to their highest point since 2018 in March, according to Optimal Blue’s March 2024 Originations Market Report.

The average score hit 737, an all-time high in Optimal Blue’s data, which dates back to January 2018.

Scores for FHA borrowers also hit 6-year highs, clocking in at 677 in February and 676 in March. VA and conforming loan scores soared to highs not seen since 2021.

“Driven by rising interest rates and home prices, we’re witnessing the highest average homebuyer credit scores in years,” said Brennan O’Connell, director of data solutions at Optimal Blue. 

“This unprecedented level of creditworthiness among purchasers is largely a result of the affordability issues borrowers face in today’s housing market, with prospective buyers with lower credit scores waiting on the sidelines until conditions improve. However, it is encouraging to see a strong pool of qualified buyers still actively pursuing homeownership.”

Buyers with lower credit scores are unlikely to qualify for the best interest rates. With high rates already burdening the most qualified buyers, sending average monthly payments soaring, those with less-than-ideal scores may be priced out of homeownership.

However, rates have stabilized in 2024, fluctuating between 6.5% and 7% since January. If rates hold steady, potential buyers can more easily plan ahead and address their credit scores with an idea of what their rate might end up being.

“Knowing that rates have stayed steady may make for a less fraught home shopping experience,” Jessica Lautz, deputy chief economist at the National Association of Realtors, noted.

Rate lock volume also grew, up by 17% month-over-month as the spring buying season kicked off.

Rate/term refinance activity saw a boost of 19% from February, while cash-out activity rose by 11%. Optimal Blue attributes the increases to an improving rate environment.

Purchase lock counts were down 24% YOY, but the report suggests Easter’s March date played a role in that decline. Easter was in April last year.

The average loan amount rose by $8,000 to $367.3K, and the average home purchase price increased by $9,700 to $463.8K.

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