Why Won’t Buyers Make the Leap?,from www.realestateeconomywatch.com, reports that halfway through the spring buying season, mortgage applications fell 1.2 percent for the week ending May 21 and the unadjusted Mortgage Bankers Association’s Purchase Index fell even more. It was down 2 percent in just one week–15 percent lower than it was a year ago at this time. Such a decline in borrowing to buy a home in the third week of May is virtually unprecedented, but it corresponds with the anemic sales reports from the National Association of Realtors. A recent survey by loanDepot suggests that despite the gradual relaxation of lending standards buyers are simply giving up trying to get a mortgage. Fear that they will not qualify for a mortgage has stopped half (50.7%) of today’s potential home buyers from pursuing the financing they need to buy a home, according to loanDepot’s national survey released last month. The survey found plenty of pent up demand—one in three Americans (29%) say they’d like to buy a home in the next two years and 71 percent of those who want to buy a home in the next two years will need financing. Yet 74% of those who want to buy a home but fear they won’t qualify for a mortgage admit they haven’t taken any steps to qualify. Only 27 percent have actually taken steps to see if they can get a loan. So why are buyers giving up?
The survey found that:
- Potential buyers fear they won’t qualify. Half (53%) erroneously think it’s harder to get a loan today compared to a year ago.
- Many potential buyers think they need a higher FICO score to get a loan than they actually do today. Half of all Americans don’t know what minimum FICO score is required to qualify for most loans, while 18 percent think they need a minimum FICO score of 680 to 770+ to qualify. In reality, 33 percent of all closed loans in Feb 2014 had an average FICO score of less than 700 compared to 24 percent one year ago.
- Many potential buyers overestimate the impact that their debt to income ratio (DTI) has on their credit worthiness. Of those who want to buy but have given up, almost a third (34%) say their DTI is too high while 24 percent say it’s lower than what is needed. By comparison, 15 percent of those who want to buy a home but are not concerned about qualifying for a loan say that their debt is too high. In fact, industry reports show many mortgage lenders have relaxed their debt to income requirements.
Here is the link to the entire article: http://www.realestateeconomywatch.com/2014/05/why-wont-buyers-make-the-leap/
Skyline Ranch Subdivision in San Tan Valley AZ
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