Fannie Mae: Consumers typically overestimate mortgage requirements
Consumers are frequently unaware of the requirements to qualify for a mortgage or overestimate the necessary qualifications, according to a recent report by Fannie Mae.
Fannie Mae recently published the results of a nationally representative survey of 3,000 Americans conducted in 2018, comparing them to a similar survey from 2015. While respondents were more likely to take advantage of resources to monitor their credit score, they continued to show minimal understanding about down payment requirements, the maximum allowable debt-to-income ratio, and other factors involved in buying a home.
The report says such misconceptions may cause qualified buyers to remain on the sidelines even if they would be able to purchase a residence. Fannie Mae says lenders should make efforts to address this issue and provide "timely, customized, convenient, and simple" mortgage information to consumers.
The median respondent expected that lenders need a down payment of at least 10 percent when purchasing a home. In reality, some loans require just 3 percent.
Only 17 percent correctly identified the minimum range. Forty-nine percent of renters and 34 percent of homeowners said they did not know the minimum down payment required for a home purchase.
Fannie Mae suggested that buyers are more conservative with the size of the mortgage they take on, opting to put down more money at the outset. The median respondent said they would prefer to make a down payment of 20 percent, up from a median of 15 percent in 2015. Renters continued to favor a lower down payment, with a median of 10 percent.
Twenty-three percent of respondents said they were familiar with programs allowing for low down payments. This share was up just slightly from 22 percent in 2015.
The median respondent expected that they would need a credit score of 650 to qualify for a mortgage, and this estimate was unchanged from 2015. Fannie Mae says the actual minimum required score is 580; just 11 percent identified the range with this score as the minimum requirement.
Eighty-seven percent said they have seen their credit score, up 5 percentage points from 2015. Sixty-five percent said they have reviewed their credit score within the past six months, up from 53 percent in 2015.
One in four respondents said they review their credit score with a credit monitoring service. Another 23 percent got their credit score from their credit card statements, while 18 percent had requested a credit report.
Forty-three percent said they did not know their credit score, a decrease of 5 percentage points from 2015. Eighty-three percent said they were confident they could improve their credit score if needed, unchanged from the previous survey.
Sixty-one percent said they thought it would be easy to get a mortgage, up 2 percentage points from 2015. Homeowners were more confident in their ability to qualify for a loan, with 78 percent thinking it would be easy; just one in three renters felt the same.
Among those who thought it would be difficult to qualify for a mortgage, 23 percent said their income wasn't high enough to afford the monthly payments. Seventeen percent said they had too many existing debts, while 15 percent felt that their credit score or credit history was insufficient and 14 percent did not think they could afford the down payment or closing costs.
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