Renter Attitudes: Desire is High, Confidence a Bit Shaky

There’s an appetite for homeownership this year according to the 2017 Borrower Insights Survey by Ellie Mae. The origination software company surveyed 3,099 individuals between ages 18 and 70 during the final weeks of 2016 and found:   

  • 52% would like to buy a home 
  • 66% have saved money for a down payment 
  • 70% have never had a mortgage 

The large number of respondents who “have never had a mortgage” is an indication that they are first-time home buyers in the purest sense because they’ve likely never actually owned a home. First-time buyers are also defined by the Internal Revenue Service and other institutions who set guidelines as “someone who has not lived in a home they have owned for a period of two years.” That definition permits people who lost homes to foreclosure, participated in a short sale or sold property without buying another primary residence to re-enter the market and take advantage of programs available to first-time buyers.  

While desire to buy homes is high, both of these renter groups – “true first-time home buyers” and “first-time home buyers by definition” – have reservations about being able to qualify for financing:   

  • 29% believe they must have a credit score of 700-749 to qualify for a mortgage 
  • 31% believe their credit score is too low to qualify for a loan 

In reality, average FICO credit score for all loans was 723 in February and the average credit score for Federal Housing Administration (FHA) loans averaged 690 during the same period. The challenge for mortgage and real estate professionals as the busy buying season gets underway is to communicate the truth about credit and down payment requirements in a way that draws these consumers in to find out what’s truly possible for them.   

Reaching out to potential buyers using actual recent industry data is more powerful than a simple sales pitch. Education is important for all potential buyers, but it’s particularly critical for the knowledge-hungry Millennial crowd who constitute the largest portion of the home-buyer pool.   

The recent credit score data showing “real versus perceived” numbers provide a great opportunity to reach out to leads – new or stale – with encouraging data that could likely entice people to take the important step of getting pre-approved.  Loan officers should arm their Realtor partners with these new numbers and give agents talking points that can help nudge people from ‘hoping and dreaming’ to ‘making a plan and moving forward.’