Lake Minnetonka credit scores are a genuine concern among a growing number of young consumers considering entering the home buying market. First-time home buyers that could potentially exchange their rent payments for equity-building house payments are remaining on the sidelines. They are fearful their credit scores may not be good enough to qualify for a mortgage. The scary thing is, they may be absolutely correct.
Lake Minnetonka Credit Scores Worries First-timers
According to a recent survey prepared by the credit-reporting agency, Experian, roughly a third of future first-time home buyers are worried about their credit scores. They are among an ever increasing percentage of young people who are worried their credit scores won’t be high enough to obtain financing to purchase a home. Nearly 45% of respondents say they’ve put off buying a home until they can improve their credit score. Roughly 20% said they were more likely to decide against pursuing a mortgage loan to buy a home for the next five to ten years.
Credit experts agree that mortgage lending is still relatively tight. In addition, since a credit profile is one of the major factors in securing financing, lender’s continue to use it as an indicator of a borrower's financial health. Therefore, say mortgage lending experts, it’s important for young people with lower credit scores to improve their creditworthiness.
Around 75% of survey respondents said they were working on improving their credit scores. Steps cited include reducing outstanding debt, paying installment bills on time and being more vigilant to protect their credit from identity thieves and fraudsters. Despite these measures, only 30% of homebuyers last month were first-time buyers. This represents a substantial reduction in the historical average of first-time buyers.
According to top economists, qualified first-time home buyers should be more prevalent in the mortgage and home buying markets. With rents rising in nearly all real estate markets and with average interest rates remaining affordably low, the first-time home buying market is ripe for young borrowers.
Let’s examine a few reasons why first-time borrowers are so worried about their credit. In addition, let’s look at how creditworthiness – or the lack thereof – impacts other factors in the home buying arena and Lake Minnetonka credit scores.
Young, prospective home buyers – especially first-time purchasers – have heard for years how important credit history is in obtaining a mortgage loan. Many of them have a limited number of credit accounts and have expressed concerns about qualifying for a home loan. Others have credit card debt or auto debt where monthly payments have been late. Naturally, that history will negatively impact their Lake Minnetonka credit scores.
Student loan debt is another big issue facing a large number of young home buying prospects. When they finished college and finally found a job in what has been a difficult employment market in recent years, student loan debt repayment weighed heavy on many. For the vast majority of these young people, student loan debt represents their largest payment obligation. Some fear adding to that debt will prevent them from meeting the lending criteria required to get a home mortgage.
There are, no doubt, genuine credit concerns among young borrowers contemplating buying a home for the first time. However, there are additional reasons Millennials cite for not yet becoming homeowners. Young people are mobile and transient. They are getting married later, which means they are having families later. Real estate experts say they deal with many more young couples than young singles looking for homes. Simply put, younger people are less likely to put down roots at this stage in their lives.
The job market also has a tremendous influence on not only where but how young prospective home buyers decide to live. For those in entry-level positions or working part-time jobs while pursuing graduate degrees or vocational training, the community in which they now live isn't necessarily where they plan to live in the near future. Committing to a long-term mortgage – especially as a first-time buyer – may seem intimidating to them. They instead rationalize they'd be better off deciding where their new job will be and buying a home in a neighborhood or suburb nearby. Then, they will be more likely to afford the mortgage payments along with the other expenses that go with becoming a home owner.
Ironically, the majority of young people worried about their Lake Minnetonka credit scores – as is the case with most Americans – probably have no idea what their actual score is. They've never checked it. Credit experts recommend prospective borrowers check their credit scores regularly to know where they stand. In addition, they should request a copy of their credit report to ensure accuracy and to make sure there aren't items on the report that don't belong to them.
It's a fairly safe bet the majority of young, first-time home buying prospects haven't checked their credit. So the truth is, they don't know if their credit is good, fair or bad.
Lastly, education and information are two areas in which first-time home buyers are lacking. They are unaware of the various lending programs in the marketplace designed to assist borrowers, especially those purchasing a home for the first time. While lending requirements vary, there are loan products that can help borrowers with lower credit scores or buyers with small down payments. Young people especially need to know this information exists because it can mean the difference between helping them become new home owners or continuing to remain tenants by paying rent.
You can find more articles pertaining to Lake Minnetonka credit scores in the Lake Minnetonka Mortgage Info section of our site below Lake Minnetonka Real Estate Categories in the column to your right.
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