Sixty-five percent of recent survey respondents feel home ownership is a dream come true or an accomplishment to be proud of. But when it comes to achieving that dream, many consumers may sit on the sidelines because they’re overestimating what it takes to make it come true.
Many consumers have misperceptions about the credit score, down payment, and income requirements needed to qualify for a mortgage, according to a survey released by Wells Fargo and Ipsos Public Affairs of more than 2,000 U.S. adults. A high percentage of home owners are still unaware of recent efforts by lenders and the government to enhance the availability of credit through lower down payment programs.
Two-thirds of consumers surveyed believe they need a very good credit score to purchase a home, with 45 percent believing a “good credit score” is over 780 (many lenders consider scores over 660 to be “good”). Consumers also tend to overemphasize credit scores as a single factor that determines whether they’ll be able to buy a home. But a credit score is not the sole criteria. Many lenders will consider a loan applicant’s entire financial picture, including income, assets, debt-to-income ratio, credit history, credit scores, and the amount of the loan compared to the value of the property.
Also, the survey found that consumers tend to overestimate the down payment funds needed to qualify for a home loan. Thirty-six percent of respondents said they believe a 20 percent down payment is always required, the survey showed. However, down payment options are available as low as 3 percent or 3.5 percent for some loan programs.
“The American aspiration for home ownership is alive and well,” says Franklin Codel, head of mortgage production for Wells Fargo Home Mortgage. “Home ownership has traditionally been the vehicle through which many people build wealth and financial stability. Home-buying and its downstream financial benefits strengthen the U.S. economy with strong neighborhoods and vital local businesses. For the millions of consumers who express a desire to own a home, it’s essential that lending and housing professionals provide clear, simple information to build consumer confidence about buying a home.”
Source: “Consumers’ Misconceptions Temper Desire for Home Ownership,” Business Wire (June 16, 2015)