It’s easier to get a mortgage than you think

Stop overestimating the difficulty of qualifying

Got a reliable job and have okay income and credit? If so, you might be surprised at what kind of home you can qualify for.

Problem is, many eager to own a home don’t even try to get a mortgage. That’s likely because they think rigid mortgage requirements will rule them out.

Or they lack basic info on the mortgage and home buying process.

New research indicates that consumers think it’s harder to qualify for a mortgage loan than it actually is. And many lack the facts and know-how to properly pursue home financing.

Don’t rule out buying a home because you think you’re ineligible for a loan. Chances are that, armed with knowledge and the right guidance, you can buy that home you’ve been thinking about.

Report: Consumers think mortgage guidelines are tougher than they are

Fannie Mae recently polled 3,000 consumers about their understanding of mortgage requirement rules. Some findings were surprising:

• Only 11 percent were aware that the minimum FICO credit score needed to obtain a mortgage is 580. Most thought it was 650.
• Over 40 percent didn’t know their own credit score.
• Most people think you need to put down at least 10 percent for a down payment. The truth is, the median is 3 percent; some programs don’t even require a down payment.
• Only 23 percent of respondents were aware that low down payment programs are available.
• Over three in five didn’t know that the debt-to-income ratio lenders don’t want total debt payments to exceed is 50 percent.
• Only 12 percent of homeowners and 9 percent of renters were able to identify the correct credit score range needed to qualify for a mortgage.
• The top five reasons cited for expected difficulty in getting a mortgage were
  1. Insufficient income (chosen by 23% of respondents)
  2. Too much debt (17%)
  3. Insufficient credit score/credit history (15%)
  4. Affording the down payment or closing costs (14%)
  5. Lack of job security/stability (9%)

There’s another takeaway about those who would rather rent than buy. The report suggests that these people are more uncertain about mortgage requirements. And that may be what’s holding them back from learning more details or reaching for a goal that seems out of their grasp.

Avoiding the unknown leads to missing out on homeownership

Steve Stapleton, assistant vice president of Real Estate Lending for Amplify Credit Union, explains why so many people suffer misconceptions about mortgage requirements.

“The financial downturn started in 2008,” he said. “Then, the lending industry underwent significant changes to adjust to new financial regulations, even eliminating some mortgage products. These changes caused many financial institutions to be more conservative in their offerings. They emphasized risk-based pricing.”

Many consumers believed the message was clear: Anyone without an excellent credit score will have to pay prohibitive rates or simply not have any option for purchasing a home. “Hence, many would-be buyers have assumed home ownership isn’t in the cards for them. That couldn’t be further from the truth,” adds Stapleton.

Michael Mesa is a Certified Mortgage Planning Specialist with Fairway Independent Mortgage Corporation. He says too many people talk themselves out of seeking a mortgage.

“People generally try to avoid pain or embarrassment.”

“No one likes to hear the word ‘no.’ And people generally try to avoid pain or embarrassment. Many think it’s easier not to try and, therefore, not to be disappointed,” says Mesa.

Or, “they may know a friend or family member who had a less than enjoyable mortgage experience. Stories like that can become a strong deterrent,” Mesa notes.

Bruce Ailion, Realtor and property attorney, isn’t surprised that so many are uninformed about credit scores and mortgage requirements.

“Financial literacy is often self-taught. Credit scores, budgets, mortgage fundamentals, and balancing a checkbook isn’t something that comes naturally. You need the desire to learn and someone with experience to teach you,” says Ailion.

There’s a reason why many lack these facts.

“Information available on the internet can be overwhelming,” says Stapleton. “It can be tough for buyers to vet the accuracy of educational content properly. You sometimes get a lot of different experts saying different things.”

Don’t be afraid to learn and try

Often, only two things stand in the way of buyers seeking a mortgage: their own fears and lack of info about mortgage requirements.

“Consider taking a personal finance course at your local community college. Research these topics online carefully. Review your credit report for free. Learn your credit score. Explore buyer assistance programs. And find and talk with a trusted real estate agent and lending expert,” recommends Ailion.

That last tip is especially important.

“Before talking with experts, write down your questions. Never feel embarrassed or fear being belittled by asking these questions,” Mesa advised. “A true professional wants to hear your questions. That way, they can understand the big picture and give you relevant and current information.”

When talking with the pros, ask about different loan options. Inquire about down payment assistance programs available. Find out what you qualify for. Learn what your minimum down payment and credit score need to be. Determine how much you’ll pay monthly and over the course of a given loan. Get the 411 on all the mortgage requirements.

“You need to do careful research. Be sure you fully understand the terms of a loan or program. And learn how it affects the total cost over the life of your loan,” adds Mesa.

See if you qualify

Loan experts agree: many people think they will be eligible to buy later in life but not now. To their surprise, they can buy immediately.

Check your home buying eligibility and get a rate quote below.