Worried You Don’t Qualify for a Home Loan? You May Be Pleasantly Surprised.
A recent survey found that more than half of today’s prospective homebuyers — 56 percent — say they have put purchase plans on hold because they fear being rejected by lenders. Even among current homeowners, 30 percent believe they wouldn’t qualify for a loan today to buy another property.
The survey, conducted in March by the firm OmniTel, also found that 74 percent of potential homebuyers said they have not taken the steps to qualify for a loan or investigated the mortgage process yet.
Many buyers think they need nearly perfect credit scores to qualify for a mortgage, but that’s not true.
According to Ellie Mae, a Pleasanton, Calif.-based company that makes software for the mortgage industry, 33 percent of all home loans approved in March had borrower FICO scores below 700. A year ago only 24 percent of such loans were approved.
Those numbers are far below the maximum FICO score of 830, suggesting that many nervous homebuyers may qualify for a mortgage after all. FICO scores for successful borrowers averaged 755 in March for conventional home loans, down from 761 a year ago. FICO scores for Federal Housing Administration (FHA) loans averaged 684, down from 696 last year.
Ellie Mae said lenders have loosened their loan requirements, including debt-to-income ratios, over the past year to attract more business.
Real estate columnist Kenneth R. Harney, writing in The Washington Post, said data from the OmniTel survey and Ellie Mae should bring prospective homebuyers back to the table.
“If you’re on the sidelines,” Harney wrote in a recent column, “check out what’s really going on in the mortgage market. There may be more opportunities — even in an era of tighter underwriting — than you think.”