Misconceptions Among Potential Homeowners About What It Takes to Buy a Home
The Fed left rates alone this week which was good news for the financial markets. It was not the best news for mortgage rates, but it wasn’t the worst either. A drop would have been nice, but not moving isn’t expected to have much impact on mortgage rates, which remained pretty much flat for the week.
Potential homebuyers can still find very attractive rates across all programs to help them get into that new home this summer. Purchase activity was down slightly for the week but remained slightly above last year’s levels.
Fannie Mae recently surveyed potential homebuyers to gauge perceptions about what it takes to buy a home. They found that only one-third of renters thought it would be easy to get a mortgage. And those same people generally overestimated the minimum credit score necessary to qualify for a mortgage. Most people thought getting a mortgage required a credit score of 650. A score of 620 or above gives you the most flexibility in financing, but you can usually still get a mortgage with a score as low as 580. Interestingly, about 40% did not know their own credit score.
People were also way off estimating the minimum down payment to qualify for a mortgage. Most people said 10% when 3% is usually all that is really needed. And only 23% of people know about the down payment programs available in many states.
Fannie concluded that for some Americans who would like to own a home, “they could qualify for a mortgage but may assume homeownership is not a possibility.”
The survey found the top reasons people expect to have difficulty getting a mortgage are:
- Insufficient income to afford monthly payments
- Too much debt
- Their credit score or credit history
These misconceptions are all about education. That is something we can fix.