We’ve been discussing the decline in first time home buyers for some time now. At a historically low 30%, first-time home buyers are having more issues than one when it comes to purchasing a house. In earlier blogs of mine I reflected on several factors which have contributed to the decline including student debt and rising rental prices. Another factor which seems to be at play here is credit scores.
At one point in time being approved for a mortgage was essentially a walk in the park. Unfortunately, being approved for a mortgage in today’s economy has proven to be a bit more challenging. CNBC.com recently reported on a survey from Experian where first-time homebuyers where asked to share their reservations when it comes to applying for a mortgage in conjunction with their credit score. Of those surveyed, a third of potential first-time homebuyers felt as though their credit score might hurt their ability to buy a home, 45% claimed they have delayed the process to first improve their credit.
In the article for cnbc.com, Lawrence Yun, chief economist for the National Association of Realtors shared her position on situation at hand, “With rents steadily rising and average fixed rates well below 4 percent, qualified first-time buyers should be more active participants than what they are right now,”. Yun’s opinion is correct in that today’s real estate market, mortgage payments are cheaper than rents in some areas. Unfortunately, without securing a reasonable credit score, potential first -time homebuyers will be stuck paying those alarming rents.
While your credit score has always been a considerable factor in the mortgage application process, it now has a more substantial impact in your outcome. If you’re looking to purchase a home, it’s best to consider your credit score early on. Focus on paying your bills on time and paying down as much debt as you can. Banks want to see that you’re financially responsible and stable prior to approving you for a mortgage, the sooner you get ahead of it, the better.