Home Buyers: Afraid of Mortgage Rejection? Read This!
According to a national survey of consumers that cited responses from more than 1,000 people in the US, 30% of current home owners say they think they wouldn’t quality for another loan, according to the firm OmniTel in April 2014. In fact, respondents who want to buy a home within the next 24 months, a group that equates to 56% of all home buyers, say they’re delaying their purchases.
More Survey Results
Such fear isn’t all that uncommon, say real estate agents and brokers across the the US. In fact, an incredible 74% of potential home buyers who need mortgages to finance their home purchases have reported that they haven’t even begun the process of either investigating or taking the steps needed to qualify for a loan. The reason? Many prospective buyers believe that they must have a nearly perfect credit score or a FICO score of 770 or higher to obtain a mortgage. In addition, about one third of potential borrowers feel that their debt-to-income ratio is too high. Although these factors do influence buyers’ mortgage applications, the only way to find out for yourself is to place an application. The fact is that such fears may be overblown.
The Real Situation
Ellie Mae, an entity that provides loan origination and tracking software for the mortgage industry has reported that 33% of all new loans in March 2014 had borrower FICO scores below 700. This percentage has grown as well; a year ago it was just 27%. The FHA reports that its insured loans had an average FICO score of just 684 in March 2014. Conventional mortgages, though, remain higher, with an average of 755 required to qualify. However, this number is down from 2013. Finally, debt-to-income ratios generally aren’t as strict as many potential buyers think — the FHA average ratio in March 2014 for purchased homes was 28%, while loans backed by Fannie Mae and Freddie Mac averaged 22%.
Bottom line? The numbers show that most buyers have a much better chance than they think to qualify for a mortgage. They should apply and not be influenced by speculation or statistics.