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The decline in foreclosures and short sales is contributing to the dearth of housing inventory, complicating the prospects for home buyers feeling the pinch of tight credit and lenders that need purchase mortgages to supplant refinancing once interest rates rise.
June 15
There are fewer consumers today who believe that it is difficult to get a mortgage compared with last year. However, the majority of respondents to an Ipsos and Wells Fargo survey still think the origination process is too tough and that there are too few homes on the market.
Changing these perceptions will require effort from stakeholders across the home buying and mortgage finance spectrum.
"There is a continuing need for lenders, Realtors, consumer groups and government to educate consumers to their options," for financing a home, said Franklin Codel, head of mortgage production for Wells Fargo Home Mortgage.
Codel and several affordable housing advocates participated in a discussion in conjunction with the release of the second annual "How America Views Home Ownership Survey" in New York on June 16.
The survey found that 57% of the respondents agreed with the statement it is very difficult for most people to get approved for a mortgage. In last year's survey, 61% agreed with the statement.
By household income, 64% of those earning less than $50,000 a year believe it is difficult to qualify for a mortgage, but just 49% of those earning more than $100,000 a year concurred.
More than two-thirds of respondents believe they need a very good credit score to buy a home, with 45% stating that a good credit score is 780, the survey found.
The average credit score of a consumer who comes into Community Development Corp. of Long Island seeking information on buying a home is 750, said Marianne Garvin, its president and CEO. People "don't realize they are ready" to buy a home, she said.
"The notion of desire is an emotional one and it can be irrational at times," said Cyrus Richardson, senior vice president of economic and housing for the National Urban League. The aim is to take clients from being irrational and bring them to the rational side of homeownership. That includes not only getting them ready to buy a home, but providing training on things like budgeting and home repair, to help keep them in the home, he and the other panelists said.
Because of the housing crisis, advocates learned the importance of providing post-purchase counseling, said Bernell Grier, the CEO of Neighborhood Housing Services of New York City.
Affordable housing advocates have received plenty of blame from some who believe they caused the housing crisis, Richardson said. Today, nonprofits need to consider the question how do they reach out responsibly, he added.
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That is important because while there has been some movement in the number of people going up the housing market chain, that won't continue unless first-time buyers come into the market, Garvin added.
Consumers need to be taught that creditworthiness is not based on a single factor such as credit score, and they also need to know they don't need to have a 20% down payment to buy a home, Codel said.
The perception problem about down payments is particularly prevalent among African-Americans and Hispanics. While 36% of all respondents believe they need to have a 20% down payment, 58% of the African-American respondents and 55% of Hispanics surveyed held that believe.
In an interview after the panel session, Codel said the
That's a big issue because 90% of those surveyed agreed that the home buying process can include many unanticipated costs, including various types of fees as well as insurance premiums.
The survey also found that 12% of current renters say homeownership is not for them. "There is no shame in renting," Richardson said, adding that renting is not a pejorative term.
Still, 17% of those surveyed (both current renters and owners) expect to shop for a home in the next two years, including 37% of African-Americans and 31% of Hispanics.
Even with all of the reservations and lack of knowledge about the process itself, consumers did indicate they are looking for their lender to be up-to-date when it comes to using technology to originate a loan.
Homebuyers want online access to their mortgage provider, but still want a human touch as well. Almost 90% said they want a personal connection with their lender, including access to someone who can answer their questions.
But nearly 80% said completing the mortgage process online was convenient, with 73% saying they were comfortable doing their loan online as long as they know they could speak with a live person when needed.
