Hello, LOs!
We spend a lot of energy trying to see around the curve in the mortgage market — what's coming in six or 18 months? As rates rise, how will refi-heavy shops cope with the purchase regime?
Taking a longer view of trends can be more difficult. But Freddie Mac has attempted to peer into the future to gauge the behavior of the borrower of tomorrow.
Of course, it helps that they have a trove of data from the three credit bureaus that spans the entire credit-visible universe of consumers under the age of 45, about 115.2 million people. Along with income data, Freddie Mac layered on socio-demographic characteristics including race, ethnicity, education level, gender, and marital status for the individuals living in the housing unit.
In this study, Freddie Mac defined "mortgage ready" as having a credit score of 661 or above, with a back-end debt-to-income ratio not exceeding 25%, no foreclosures or bankruptcies in the past seven years, and no severe delinquencies in the past year. That narrows it down to about 41 million, or 36% of the credit visible under-45 population as of January 2021.
Freddie Mac found that there is a substantial gap between the mortgage readiness of white consumers and Black consumers. While 36% of non-hispanic whites are "Mortgage Ready," only 22% (approx. 3.4 million) of Black consumers are "Mortgage Ready," the lowest among all racial groups.
Based on their calculations, it would take a white consumer an estimated 16.4 years to save up for a 20% down payment. It would take a Black consumer nearly two years longer, an Asian consumer seven years longer and a Hispanic consumer eight years longer — nearly 25 years.
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