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Three Misperceptions That Are Making It Harder for Consumers to Buy a New Home Now
The U.S. real estate market is cooling as consumers begin to lose faith in their ability to afford a home of their own. This may not be true for most prospective buyers, but no one is giving them the information they need to move forward. As lenders seek growth, it behooves them to give more borrowers the information they need to make their next home more affordable.
New data from CreditXpert’s predictive credit score platform suggests that 3 million prospective homebuyers could qualify for a lower mortgage rate right now, thus reducing their monthly mortgage payment and making more homes affordable to them.
What’s keeping them from doing so? Consumers are buying into three misperceptions that, at least for most of them, simply aren’t true. Lenders who want their business have an opportunity now to set them right.
1. Consumer and mortgage credit scores are the same. FALSE.
They’re not the same. Readily available credit scores are not the credit scores used to qualify applicants for a mortgage. Lenders know that there are different credit scores for different types of loans. Consumers, however, are not aware of this. This leads to some uncomfortable conversations when loan officers present the score they use to determine what interest rate the applicant qualifies for and they wonder who to trust.
2. Applicants are stuck with the first credit score they see. FALSE.
Not so. Data from our Mortgage Credit Potential Index (MCPI) show that more than 70% of all mortgage applicants can improve their credit score by taking simple actions during the normal mortgage origination cycle. Approximately 50% of all applicants can improve their score by up to three bands. Taking these simple actions can increase affordability and save applicants thousands of dollars over the life of their mortgage.
3. Improving mortgage credit scores takes a long time. FALSE.
Another misperception that is simply not true. Simple actions, based on CreditXpert’s more than two decades of data and analysis, clearly spell out
what applicants can do to improve their mortgage credit score. The applicant completes these tasks while their mortgage is being processed.
The truth is that many would-be homebuyers who believe they have been priced out of the market may actually qualify for a mortgage once these misperceptions are cleared up for them and they take the simple steps to better their credit score. Loan officers can help by offering this advice.
We surveyed recent homebuyers last summer. Most began the process of shopping for a mortgage before they started shopping for a home. Doing so helps the homebuyer and their Realtor target home prices and homes. And it positions the buyer to quickly make an offer when they find the right home. It also gives them the time they need to raise their credit scores.
Show them the report
Loan officers already share the credit score with applicants, but they should also be sharing the CreditXpert report to help them raise their scores and either qualify for the loan program they want or qualify for a better rate.
Let borrowers know that it is worthwhile to improve their credit score. The report spells out the simple actions they can take to reach that goal, but applicants should complete all the items quickly to lock in the best rate.
We built our platform to help lenders expand homeownership opportunities by giving them a tool to counteract the impact of rising rates and increasing home prices. Those who use it are helping more mortgage loan applicants keep their dream of homeownership alive.
Related Credit Insights
Originally featured in Scotsman Guide, Hidden in Plain Sight. Nudging a credit score upward, could be the difference between owning a home or not. Every applicant is more important than ever. The truth is that 71% of mortgage applicants with scores below 760 could better their score by at least one 20-point credit band within 30 days, allowing many to qualify for a mortgage. That’s what CreditXpert discovered when examining 24 mil- lion mid-score credit inquiries. It’s surprising how many prospective mortgage borrowers are hiding in plain sight, shielded by a credit score that is far below its potential.