There seems to be a growing chasm between what the public believes to be needed and what is actually needed to qualify for a residential home loan.
A recent survey
by Ipsos reported that:
- Two-thirds of those surveyed believe they need a very good credit score to buy a home, with 45 percent thinking a “good credit score” is over 780.
- Consumers overestimate the down payment funds needed to qualify for a home loan, with 36 percent thinking a 20 percent down payment is always required.
However, according to American Enterprise Institute’s International Center on Housing Risk’s
May First-Time Buyer Mortgage Risk Index
(FBMRI), reality is far from perception. The report reveals:
- 70% of first-time buyer mortgages had a combined loan-to-value ratio of 95% or higher
- About 20% of first-time buyers taking out mortgages had a FICO score below 660
- 25% had total debt-to-income ratios above 43 percent
- The median first-time buyer with an agency mortgage made a down payment of only 3 percent, or $7200 in dollar terms.
- The median FICO score for first-time buyers with agency mortgages was 705
- For first-time buyers with FHA-insured loans, the median FICO score was only 672
These numbers contradict the frequent claims that first-time buyers face difficulties in obtaining mortgages.
Stephen Oliner, co-director of AEI’s International Center on Housing Risk explained the reality of the situation.
“One hears all the time that first-time buyers have limited access to mortgage debt. But this isn’t true. Many first-time buyers with low FICO scores and little money down are buying homes every month.”
Last week, mortgage interest rates jumped over the 4% mark for the first time this year according to Freddie Mac
’s Mortgage Market Survey
In an article
in Housing Wire, a Bankrate
“Mortgage rates rocketed higher following a stronger than expected monthly employment report. The good news on the job front further solidifies the notion that the Federal Reserve will likely begin raising interest rates soon, perhaps in the third quarter of this year.”
This is the same type of commentary we heard back in the spring of 2013 when the talk of the Fed possibly raising rates caused mortgage interest rates to surge by a full percentage point from the end of April through the end of June of that year.
Will We See that Same Surge in 2015?
No one knows for sure. However, Fannie Mae, Freddie Mac, the Mortgage Bankers Association and the National Association of Realtors are each calling for rates to continue their upswing over the next six quarters.
Here is a chart comparing 2013 to this year:
Though no one can definitely say where rates will be six months from now, most experts believe they will be higher. If you are thinking of buying your first home or are considering a move up to the house of your family’s dreams, now may be the best time to do it.
So you want to purchase a home in 2015 but you don’t know the first steps? Well I am glad that you have came to my blog because I will help deliver the initial steps. One of the first steps is to find your Realtor. Hello, I’m Andrea and I am a North Texas Realtor here to help you (sorry for the spiel but hey). The second step is to get pre-approved. This is your most important part. You will have to have a discussion with a lender to know if you can be pre-approved. There’s no harm in talking with a lender to discuss your options to purchasing a home in 2015.
I’m here to help with your real estate needs but your mortgage lender is there for your financing needs. I have plenty of lending partners that can work with almost any situation. Check out my Pinterest board to see tips on how to be mortgage ready in 2015.
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