Three-quarters of Americans plan to buy a home the next time they move, but many are overestimating minimum down payments and credit score underwriting requirements, according to a new study from Fannie Mae.
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High mortgage rates and home prices have made consumers “extremely pessimistic” about home buying conditions, but three-quarters of people surveyed by Fannie Mae said they would be more likely to buy rather than rent the next time they move.
In a Fannie Mae survey of 3,338 home financial decision-makers, 92% of consumers said owning a home is important and 74% plan to buy when they next move, but many are concerned about mortgage requirements Somewhat blurry.
The 92-page Fannie Mae Mortgage Understanding Study found that nine out of 10 consumers exaggerated or were unaware of the minimum down payment required for most mortgages, and many were also confused by underwriting criteria such as minimum credit scores and maximum debt-to-income ratios. established.
“We believe these findings have important implications for the entire mortgage industry and serve as a call to action to help close the consumer knowledge gap through education and outreach,” Fannie Mae said in a research note released Monday.
Why consumers think now is not a good time to buy a home
Source: Fannie Mae Mortgage Understanding Study.
Home prices have been soaring since Fannie Mae last conducted a survey in 2018. Worrying questions.
Thirty-seven percent said December was a “somewhat bad” or “very bad” time to buy a home, compared with 7% in 2018, while 37% cited unfavorable mortgage rates as their top concern.
Although 35% cited high housing prices as their biggest concern, this was down from 57% in 2018.
Consumers are also less likely to say the difficulty of getting a mortgage (3%) or the lack of listings (3%) are their main concerns.
Three quarters of households plan to buy rather than rent next time they move
Source: Fannie Mae Mortgage Understanding Study.
Despite concerns about the housing market or their own financial situation, Fannie Mae’s survey shows that only 26% of people plan to become renters the next time they move. Nearly half (43%) of those currently renting plan to buy a home.
Of the 25% who actively plan to buy a home within the next three years, 50% are renters, and more than three-quarters of this group have never owned a home.
Most people planning to buy already have a down payment saved
Source: Fannie Mae Mortgage Understanding Study.
Nearly three-quarters of people actively planning to buy a home have at least some savings for a down payment.
But many people may not realize that they may have already saved enough to buy a home.
Although mortgages backed by Fannie Mae and Freddie Mac allow homebuyers to put down as little as 3%, only 24% of consumers are aware of this fact. The remainder either thought the number was higher (10% was the median response) or didn’t know (29%).
Fannie Mae and Freddie Mac allow lenders to offer mortgages to borrowers with FICO scores as low as 620, but nearly one-third of consumers believe they need a credit score of at least 700 to qualify for a mortgage.
The good news is that 93% of household financial decision-makers have checked their credit score at least once, up from 87% in 2018 and 82% in 2015, and 83% believe they can improve their credit score.
Growing awareness of low down payment loan programs
Source: Fannie Mae Mortgage Understanding Study.
Consumers are increasingly aware of low-down payment loan programs, with nearly one-third (32%) saying they are “somewhat” or “very familiar” with such programs, up from 23% in 2018. They are likely to be more aware of such programs (42%) than renters (29%).
While websites are the most frequently cited source of mortgage information (50%), consumers also rely heavily on mortgage professionals (48%) and real estate agents (40%).
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