Although the majority of Americans favor homeownership, Fannie Mae’s latest National Housing Survey revealed many overestimate the qualifications and what it takes to own a home.
“Despite increased exposure to credit scores and online resources, consumer understanding about what it takes to qualify for a mortgage has not improved since our original study in 2015, potentially discouraging willing and qualified Americans from taking steps toward homeownership,” the GSE’s report, authored by Mark Palim and Sarah Shadad of Economic and Strategic Research, stated.
Fannie Mae said that a 2018 study, which included an online survey of more than 3,000 respondents, found that more consumers reported seeing their credit scores, but close to half cannot recall what it is.
Also, consumers overestimate the necessary credit score and down payment needed to qualify for a mortgage, remain unfamiliar with low down payment programs, and an overall lack of knowledge on mortgage qualification.
“While viewing one's credit score is a good start, consumers need to understand what to do with that information,” Fannie Mae said. “Although Americans are confident they could improve their credit score, monitoring a credit score is not the same as understanding how the score impacts their financial situation.”
Fannie Mae added that mortgage education should be timely, customized, convenient, simple, and delivered when a potential borrower is making a decision on whether to buy or sell.
Optimizing information for mobile devices will play a large role in closing the gap, especially for younger borrowers.
“Some mobile apps already help consumers budget, invest, and manage debt. Mortgage tools could be integrated into more of these apps to provide step-by-step advice,” Fannie Mae said.
Education is key for millennial buyers as a June Business Wire report found that 76% of millennials feel confident about how to sell a home, despite never doing it.
The National Association of Realtors published a report that found that home sellers younger than 28-years old represented just 2% of the homes sold in 2018. The report also found that 76% of older millennials (ages 29-38) were selling a home for the first time.