There are so many people who refrain from even looking into buying a home because they fear they will not be able to obtain a great loan rate or even qualify for a mortgage. This year, more than ever a misconception about mortgages among first-time buyers has taken hold of the real estate market. With that being said, let’s take a look at why this is the case and how to move past them.
The fact is, compared to last year lenders are now accepting lower credit scores. If you feel that your credit score is too low, a lender might agree to give you a mortgage anyway. How will you know unless you step out and get a preapproval?
Recently, a survey was conducted, which comprised of over 1,000 people, all of whom were over 18 years of age. The survey claims that potential buyers are uncertain, and do not have much knowledge about the existing conditions in the housing market.
The survey found that over 56% of potential home buyers have not entered the housing market because they do not want to be rejected by the lenders. 74% of these buyers have not taken any steps towards getting qualified for a loan. As for those people, who already have a home, 30% of them believe they will not be able to qualify in today’s tough lending market.
What is the prime reason behind all these misconceptions? Perhaps it is the credit score factor. So many respondents are under the assumption they need absolutely perfect credit scores to qualify. Nearly 50% of them said they had no idea what their credit score should be to get through a mortgage process and 18% thought that their credit score should be in the range of 770.
Credit scores are not the only challenge which buyers are facing. Debt-to-income ratio is another one. Some people regard theirs to be fairly high, and do not even bother with trying to get a loan. Not having enough money for the down payment is another issue, which is faced by many potential buyers.
According to the stats, over 33% loans issued in the past year had credit scores below 700. As for debt-to-income ratio, the average values are around 28%. For the down payment, even 3.5% is acceptable for some loans.
If you are planning to buy a home, step out into the market. Obtaining a mortgage is not as difficult as you think.