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 Nearly two-thirds of respondents thought that a very good credit
score was necessary to buy a home, and more than 40 percent thought
they needed a down payment equal to at least 20 percent of the
purchase price to buy a home.
Under government-backed programs, first-time home buyers with
subprime credit scores can get a mortgage insured by the Federal
Housing Administration, and they can put down as little as 3.5
percent of the purchase price.
Since the financial crisis, lenders have clamped down on mortgage
credit. The Mortgage Bankers Association’s Mortgage Credit
Availability Index, which measures the ease with which borrowers can
take out a home loan based on credit scores, loan-to-value ratios
and other factors, fell by more than 80 percent from early 2007
through August 2014.
But there are other reasons why consumers are not taking out loans
like they once did, including the fear of being turned down. In
2013, those fears kept 19 percent of families from taking steps to
get a consumer loan, up from 18.5 percent in 2010 and above the 16.4
percent rate of families who were actually turned down for credit,
according to the Federal Reserve’s most recent survey of consumer
finances.
Even if mortgage credit is hard to come by, there is demand for
homes: more than two out of three respondents in Wells Fargo's
survey said it was a good time to buy.
Franklin Codel, Wells Fargo’s head of mortgage production, said his
bank has taken steps to expand the pool of eligible home buyers.
Earlier this year it lowered the minimum credit scores, or FICO
scores, for loans that are backed by the government the Federal
Housing Administration, Fannie Mae, or Freddie Mac.
“When we expanded FICO ranges, we saw not only an increase in
applications but we also saw an increase in approval rates,” Codel
said, without providing specifics on application volume or approval
rates.
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Codel also said that the federal government, along with Wells Fargo
and the realtors and consumer groups with whom it works, can play a
role in dispelling these myths through some kind of outreach program
along the lines of what they did with the government-subsidized Home
Affordable Refinance Program and the Home Affordable Modification
Program.
Because Wells Fargo’s survey is the first of its kind, it is
difficult to say how attitudes toward home ownership have changed
over time. Fannie Mae’s August national housing survey found a
similar number of borrowers – 64 percent – thought it was a good
time to buy a home, though tied an all-time low and was down from
the 71 percent response rate in the August 2013 survey.
(Editing by Eric Walsh)
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