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STUDY SAYS: DOWN PAYMENT IS THE BIGGEST BARRIER TO HOMEOWNERSHIP

By
Mortgage and Lending with Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 NMLS # 6869

“Study Says: Down Payment is the Biggest Barrier to Homeownership”

 

I don’t really buy the results. I am contacted everyday by individuals that want to get prequalified for a mortgage. The biggest reason for not being able to qualify someone, is CREDIT, not down payment. My sense is this question was not really addressed.

 What is the biggest barrier to homeownership

I must have over 100 clients that I am working with them on credit issues. Some issues take longer than others and in many cases, they were not aware of what the credit actually looked like.

 

This couple was referred to me the other day. I met with them to do a prequalification. During our meeting they told me that they went to a credit union a few months ago and were told, that one of them had credit scores that were too low. After I reviewed the credit scores and income, I gave them a preapproval, as they qualified beautifully.

 

They were also told they needed 10% down, but they didn’t quite have that either. They shared that they had their eye on a home, that had been on the market for a few months. This home happened to be in a town, that will qualify for a USDA loan, which requires “NO MONEY DOWN”.

 

Their monthly payment, with no money down was $1,109. They are presently spending $1,250 for rent, what a waste of money. They could have already owned this home for months, but were told that the credit was a problem. This goes on all the time.

 

Have you seen anything similar?

 

Down Payment Biggest Barrier to Homeownership: Study

By: Tory Barringer

Feelings about homeownership remain positive in the face of a diminished market, but an uncertain economy and increasing down payments are keeping Americans from making purchases, a report from Integra Realty Resources (IRR) said.

 

Wednesday’s report detailed results from an IRR-commissioned survey of non-homeowners ages 22-50 in 11 major markets. While 85 percent of potential buyers indicated that market conditions are favorable for purchasing a home, unemployment and job instability make many respondents reluctant or unable to buy a home.

According to the study, 21 percent of respondents are not planning to buy a home due to an uncertain economic outlook, while 24 percent are afraid of making a bad investment.

Thirty-one percent are not planning to buy a home because of a lack of a down payment. As banks and lenders have become more stringent, down payments have escalated to a point where many Americans can’t afford to make the investment.

“Some respondents feel that purchasing a home may be too risky in the near future,” said Benjamin Loughry, MAI, MRICS, managing partner at IRR-Dallas/Fort Worth. “The down payment conundrum continues to suppress demand with no easy resolution in sight. For this reason and the continuing foreclosures is why the homeownership rate is decreasing. This segment of the population will be turning to rental housing instead, which will further boost the rebounding multifamily sector.”

Responses tended to vary according to different areas. Respondents in Detroit are least likely to purchase a home in the next 12 months (69 percent abstaining from purchases). Respondents in Miami were the most unsure about their home buying future, with 36 percent saying they were uncertain.

More than three-quarters (76 percent) of those planning to buy a home who are age 30 or older cited “I have always dreamed of owning my own home” as their reason to buy. While that enthusiasm may be shared by some non-buyers, the ability to act on it remains out of reach.

“Clearly, the American dream of homeownership lives on,” said Jeffrey Rogers, FRICS, JD, MBA, president and COO of IRR. “But if you go deeper into the research, this may be only in a fantasy not to be realized in the current economy.”

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Joe Petrowsky, NMLS #6869

Right Trac Financial Group, Inc. NMLS #2709

110 Main St.

Manchester, Ct. 06042

Office: 860 647-7701 x116

Fax: 860 647-8940

Cell: 860 836-9294

Email: joe@righttracfg.com

www.righttracfg.com

www.joepetrowsky.com

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Joe Petrowsky does not guarantee nor is in any way responsible for the accuracy of the information provided herein, and provides said information without warranties of any kind, either expressed or implied.

Equal Housing Statement: We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. We encourage and support an affirmative advertising and marketing program in which there are no barriers to obtaining housing becuase of race, color, religion, sex, handicap, familial status, or national origin.

Comments (4)

Jeff Pearl
RE/MAX Distinctive / LIC in VA - Lovettsville, VA
Full Service Full Time Realtor

I wonder if the people in your example were working with an agent, and if they shopped more than one lender, or just quit after talking to their credit union? At least they finally did shop for a loan and find you, and looks like they are on their way to owning a home! I'm running into some problems lately where student loan debt is the problem. The down payment isn't usually an issue since we also have 100% finanicg programs for buyers to choose from.

Jun 17, 2012 09:41 PM
David Burrows
Classic Realty - Fairfax, VA
No Pressure, Just Seriously Devoted to Real Estate

Joe, I appreciate your insight into the down payment issue. Your post also motivates people to care for their credit! Thanks for sharing.

Jun 17, 2012 09:44 PM
Beth and Richard Witt
New York, NY
The best Retired Brokers !!!!

Great Info Joe... I am not in the mortgage business but from personal experience I know that most folks are refused a mortgage because of their credit not their down payment.... I hope lots of folks read your post and start paying more attention to their credit scores... Have a Beautiful New Day Joe!

 

Jun 17, 2012 10:40 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Joe I agree, credit issues are a far bigger problem than the downpayment.  I have ways around the downpayment or minimal downpayment, but credit isses have to be fixed and that takes time. 

Jun 18, 2012 04:42 AM