Report: ‘Excellent’ Credit Is Rare Among Home Buyers in Washington & U.S.

September 25, 2018
Last updated:
March 22, 2022
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There’s a common misconception that home buyers need very good or even excellent credit to qualify for a mortgage loan. But that’s not the case. It’s possible to get approved for a home loan in Washington without “excellent” credit, which appears to be rare in Washington and nationwide.

A recent report from a mortgage origination software company showed just how rare very high credit scores are. And yet, many mortgage applicants with credit scores that are not considered the healthiest are still able to secure home loans to purchase a home in Washington.

Perfect Credit Scores Rare Among Mortgage Applicants

Mortgage software company Ellie Mae publishes its “Origination Insight Report” every month, which analyzes information from a huge sampling of mortgage loan applications. As such, it gives us some good insight into various trends within the industry, hence the name.

These reports back up a key point made earlier, that excellent credit is rare among home buyers in Washington and across the rest of the nation. Most borrowers who take out mortgage loans have credit scores that would fall into the average, good, or very good range.

Here’s the distribution of FICO credit scores for purchase loans:

  • 500 – 549: 0.04%
  • 550 – 599: 0.63%
  • 600 – 649: 8.54%
  • 650 – 699: 17.36%
  • 700 – 749: 23.13%
  • 750 – 799: 36.20%
  • 800 or higher: 14.09%

Again, these percentages are based on a large sampling of borrowers across Washington State and the rest of the country. So there are several conclusions we can draw from these numbers:

First of all, it’s worth noting that the vast majority (76.69%) of home buyers who used a mortgage had credit scores ranging from 650 – 799. So that’s where the bulk of lending takes place. Once you get outside of that range — either higher or lower — the numbers drop off.

We can also see that there’s a soft threshold around the 600 FICO score range. Once you drop below that level, few home loans are being generated. The 550 – 599 scoring range accounted for only 0.63% of total loan volume. Once you get below 550, there is almost no mortgage origination taking place. So another conclusion from this data set is that mortgage loans for home buyers with credit scores below 600 are rare, but they do happen.

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The Good News for Home Buyers in Washington

Another point we can draw from this report has to do with the statement we began with. You don’t need perfect or “excellent” credit to buy a house with a mortgage loan in Washington, or elsewhere in the nation.

According to Experian, one of the three credit-reporting agencies in the U.S., an “exceptional” credit score falls between 800 and 850 on the FICO scoring scale. (That particular scoring model ranges from 300 – 850.) “Very good” is 740 – 799. And a “good” credit score is considered to be 670 – 739.

Going back to those percentages from the previous section, we know that a lot of home loans are going to borrowers with fair, good, and very good credit. During March 2020, only about 14% of home buyers had what is considered to be excellent or exceptional credit scores.

The key takeaway here is that perfect credit is generally not needed to qualify for a home loan. This is true in Washington, where we are based, and elsewhere across the country. A borrower with a good or even “fair” score could qualify for mortgage financing, as long as he or she has the capacity to repay the loan.

What to read next: Another common myth among home buyers (as revealed by surveys) is that you have to put down at least 20% when buying a home. This too is inaccurate. Here’s a related article on our site that tackles the 20% down payment misconception.

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Have Questions About Mortgages in Washington?

Are you curious about whether or not your credit score is good enough to secure a mortgage? Do you have questions about home loans that you need answered? Sammamish Mortgage can help. We are a local, family-owned company based in Bellevue, Washington and serve borrowers across WA, ID, OR, and CO since 1992. We have many mortgage programs for your to choose from with flexible qualification criteria. Please contact us if you have mortgage-related questions.

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