Most Americans have now arrived at the conclusion that it is a good time to buy a home. Prices have stabilized, and in some cases are continuing to rise (as outlined in two of our most recent blogs: HERE and HERE). That’s the top line analysis from one of the country’s major mortgage creators, but there’s a secondary finding about credit scores that could also have a sizeable impact on Maryland real estate activity. Some would-be Baltimore homeowners would benefit from learning the information – which is actually a bit of misinformation.
The second annual “Wells Fargo Homeownership Survey” is a national survey of 2,016 respondents, and the source upon which last week’s Franklin Codel analysis is based. The excellent news for current and soon-to-be Maryland home sellers is that a whopping 72% of respondents think now is a good time to buy a home. Most Americans also agree that “owning a home remains a vital part” of the American dream – and continues to be a key element in the strength of the nation. (also outlined in another recent blog)
Running counter to that upbeat survey result is the finding that despite the efforts of lenders (and the government) to make credit more available to potential mortgage applicants, two misconceptions are widespread enough that they are “holding many potential buyers back.”
The misinformation:
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⎫ The misconception that every buyer must have at least 20% for a down payment; and
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⎫ A belief that credit scores alone determine whether an applicant will land a home loan
Under the heading “The legend of the 20% down payment”, Wells Fargo’s Codel points out that 36% of the general population (and larger proportions of minority groups) qualify for loans with lower down payment options – some of them as low as 3%. Sometimes even 0% when using a Maryland Grant Program or if you are a VA purchaser.
But equally illuminating is what Codel has to say about the importance of credit scores. He is the head of mortgage production at Wells Fargo, so Maryland home seekers should pay attention to what he has to say, which is that credit scores are not as all-important as most people think. Because creditworthiness is not determined based on a single factor, homebuyers should do some investigating of their options “before excluding themselves based on credit scores alone.” And when it comes to the actual scores themselves, it’s not true that a ‘good credit score’ has to be above 780. There are multiple models and investor guidelines—and under some of them, more than 660 “is generally considered good.” Maybe even lower!
If it’s true that American homebuyers agree that now is the time to make a foray into the market, it’s refreshing (and rare) to hear a top mortgage lending insider provide that kind of encouragement. His conclusion is that the cited misconceptions can be overcome with a “better understanding of how credit works”—and that a good lender will use a borrower’s “entire financial picture, not just credit score” to decide whether to issue a mortgage.
Even if at the end of the day your credit score isn’t high enough, with the advent of increased technology, the credit scoring “system” is far more transparent then it used to be, and many times with just a few calculated payments and the closing or opening of certain accounts, potential home purchasers can increase their credit scores very consistently and in some cases, VERY QUICKLY! Lenders can “re-score” their potential purchasers without harm to their credit in the form of inquiries, and the increase of credit scores can be established many times faster then in the past. Changing your credit scores can start as quickly as today.
The takeaway is for prospective buyers to do some investigating to find out what their home owning prospects actually are: they might be pleasantly surprised…. and as we said, even if they need some improvement, it can happen very rapidly!
When you are in search of guidance throughout the home buying process, starting with qualifying for a mortgage, turn to Maryland’s OWN Real Estate Company, ExecuHome Realty. Giving guidance to over 3,000 Maryland home sellers and purchasers per year, ExecuHome was born and raised in the Great State of Maryland, and is home to over 350 licensed, experienced Realtors spread out across 7 full service locations. We Can’t Wait To Help You… Contact Us At 443-632-3800.
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