CAMPBELL, Calif., March 10, 2011 /PRNewswire/ -- Speculative fears
by renters who think they can't afford the costs related to owning
a home may cause many first-time home buyers to miss out on the
opportunity of a generation to become homeowners this year.
According to Fannie Mae's National Housing Survey released last
week,(1) financial fears are the top reasons given by renters for
not buying a home, followed closely by purchase and upkeep
affordability.
Yet new research by the Opinion Research Corporation and
MortgageMatch.com suggests consumers' knowledge of credit scores
and their importance is far from perfect. Thus, renters' lack of
knowledge about mortgages and the process may be one of the biggest
road blocks to homeownership as a first-time buyer.
In the January 2011 study by
Opinion Research Corp. for the Consumer Federation of Americas,
1000 consumers earned a D- score when they took a 22 question test
on credit scores and credit in general. This credit-knowledge study
found consumers answered just 60 percent of all questions
correctly. Most didn't know where to find their credit scores, what
constitutes a strong score, or the financial cost of a poor
score.(2) Even more concerning, thirty-five percent (35%) of
successful buyers recently reported they didn't know their credit
score when they went house shopping, according to a national survey
fielded for MortgageMatch.com, a leading mortgage website offering
real loans and real rates in real time operated by Move, Inc.,
(NASDAQ: MOVE), the leader in online real estate and operator of
Realtor.com.(3)
"There's strong evidence that hundreds of thousands of potential
home buyers have taken themselves out of the best home buying
market in years before they've determined their financial position
and what's involved in owning a home. Today you can easily find out
where you stand and what you can afford in order to make an
informed decision," said Sue
Stewart, senior vice president for Move, Inc. "Buyers who
prepare themselves financially before they start looking for a home
will have a better chance of succeeding. If you want to be in a
position to land the best mortgage that fits your needs, start
early, educate yourself on your financial situation, get your
documentation together and find a lender you trust."
Stewart, an accomplished mortgage professional with 20+ years of
experience in residential lending, has created a checklist of ten
tips to help first-time home buyers improve their chances of
getting a mortgage on favorable terms.
1. Pay down debt. Before you apply for a mortgage,
reduce your total debt (monthly payments on credit cards, auto
loan, student loans, consumer loans) to help reduce your overall
debt-to-income ratios and improve your credit score. Generally,
your ratio should be 36 percent of your gross monthly income. Also,
the total of your housing expenses alone, whether you are renting
or buying, should not exceed 28 percent of your monthly gross
income.
2. Clean up your credit. About half of all renters
think they don't have good enough credit for a mortgage, but most
don't really know. Obtain your free credit report from each of the
three credit bureaus (Equifax, Experian and TransUnion) and
carefully review them, noting all negative items. Contact creditors
to correct inaccurate or outdated items. It will take time, but you
need to raise your credit score to a minimum of 680 and ideally to
720 and above to qualify and to avoid being penalized with a higher
rate of interest.
3. Make no new large purchases and don't apply for
new credit before or during the period that you are applying for a
mortgage all the way up to closing. Lenders check credit reports at
the time of an application and again right before closing. Last
minute questions about your credit can cause a delay, a higher
interest rate, or a denial from a lender. Wait to buy the new
furniture until the house is yours.
4. Increase your down payment. This will reduce
the loan-to-value ratio and increases the likelihood of getting a
loan and better terms from your lender. Increasing your down
payment immediately increases your equity, reduces the amount you
borrow and reduces your monthly mortgage payment. If you are in
need of down payment assistance, more than 4000 local and state
governments offer workforce house assistance for low to medium
income buyers. Some require homeownership education, which can be
very helpful.
5. Gather documents beforehand. Don't wait
until the last minute and find yourself having to scramble for
paperwork that supports your employment status, assets and credit.
Have all the necessary documentation ready for review when you
apply. Collect your income tax returns, pay stubs, bank and
financial statements, and student loan paperwork. Stay on top of
your documentation as time passes while your application is
pending, and get updated documents, such as pay stubs, to your
lender.
6. Anticipate closing costs. Closing costs,
which can run 5- to 7-percent of your total transaction, add up
quickly and must be paid in cash -- in addition to your down
payment. Be prepared to have adequate cash on-hand.
MortgageMatch.com offers applicants the ability to review estimated
closing cost via a good-faith estimate before making an offer on a
home.
7. Determine the type of loan you need.
Fixed rate? Adjustable? FHA or VA? Fifteen or 30-year term? Jumbo?
Second trust? These decisions aren't just financial; they also
reflect your lifestyle, your risk tolerance and the programs for
which you might qualify. Do your homework and make a decision
before you go house hunting. Don't let someone talk you into a
different game plan to stretch your finances to afford a particular
property.
8. Ignore "bait rates." Some mortgage advertising
can be misleading with low rate promises. Beware. These "bait
rates" are only for those with extraordinary credit with no
contingencies. Your rate will be based on many factors: your
credit, your debt-to-income and loan-to-value ratios, the size and
type of your loan, where you live and the day you lock your rate,
etc. You won't know what your rate will be until your application
is accepted. By then, it may be too late for you to find a
competitive rate from another lender. Instead, pick a lender you
trust, who will work with you and helps you find the best
all-around deal.
9. Negotiate a lower home sales price.
Getting a better deal on your home not only works for you, it works
for your lender because it lowers your loan-to-value ratio. Prices
are still falling in many markets and sellers are eager to make a
deal. If you're not sure what a property is worth, you can ask your
Realtor for a comparative market analysis. You can also visit
Realtor.com to check property values. It's still a buyer's market,
so negotiate a deal.
10. Have a cash reserve. A good rule of
thumb is to have at least three months salary saved as a cushion
before you buy. This will help with your ratios and enable you to
afford and cover closing costs.
"The fastest and easiest way to know whether or not you can
afford to buy—and how much you can afford—is to visit
MortgageMatch.com. The site was designed to help borrowers at all
stages and at all levels get the information they need and
experiment with different scenarios in a secure and comfortable
environment that's easy to use," Stewart said.
Using MortgageMatch.com's Snapshot feature, potential buyers can
easily find out whether they can pre-qualify for a mortgage that
fits their particular needs and financial situation, as well all
the costs they will incur with buying a home, including down
payments, monthly payments, closing costs, taxes and insurance. In
just a few minutes, and at no cost, buyers can anonymously find out
how much they can afford for a home loan based on real rates
offered on a selection of real loan products. All information is
anonymous; no registration or personal information is required to
use the MortgageMatch.com Snapshot feature.
MortgageMatch.com's PreQual Plus feature provides qualified
buyers with a guaranteed electronic pre-qualification letter in as
little as 10 minutes. Buyers can e-mail their prequalification
letter that includes actual loan terms and corresponding rates to
their real estate agent or print it out themselves before touring a
home. Because MortgageMatch.com employs automated underwriting,
buyers are a step closer to approval than they would be through
other prequalification programs.
ABOUT MORTGAGEMATCH.COM
MortgageMatch.com is operated by Move, Inc. (NASDAQ: MOVE).
Through a partnership with a national mortgage banker d/b/a
Mortgage Match, a variety of quality loan products are offered to
home buyers interested in financing the purchase of a property or
current homeowners interested in refinancing their current
mortgage. Consumers can access such products at
http://www.mortgagematch.com/.
ABOUT MOVE, INC.
Move, Inc. (NASDAQ: MOVE) is the leader in online real estate
with 12.98 million(4) monthly visitors to its online network of
websites. Move, Inc. operates: Move.com, a leading destination for
information on new homes and rental listings, moving, home and
garden and home finance; REALTOR.com(R), the official website of
the National Association of REALTORS®; MortgageMatch.com,
Moving.com; SeniorHousingNet; ListHub; and TOP PRODUCER Systems.
Move, Inc. is based in Campbell,
California
This press release may contain forward-looking statements,
including information about management's view of Move's future
expectations, plans and prospects, within the safe harbor
provisions under The Private Securities Litigation Reform Act of
1995. These statements involve known and unknown risks,
uncertainties and other factors which may cause the results of
Move, its subsidiaries, divisions and concepts to be materially
different than those expressed or implied in such statements. These
risk factors and others are included from time to time in documents
Move files with the Securities and Exchange Commission, including
but not limited to, its Form 10-Ks, Form 10-Qs and Form 8-Ks. Other
unknown or unpredictable factors also could have material adverse
effects on Move's future results. The forward-looking statements
included in this press release are made only as of the date hereof.
Move cannot guarantee future results, levels of activity,
performance or achievements. Accordingly, you should not place
undue reliance on these forward-looking statements. Finally, Move
expressly disclaims any intent or obligation to update any
forward-looking statements to reflect subsequent events or
circumstances.
(1) "Fannie Mae's Latest National Housing Survey Shows Key
Changes in Americans' Attitudes Toward Housing and the Economy Over
the Last Year. " Fannie Mae Press Release. February 28, 2011.
http://www.fanniemae.com/media/survey/index.jhtml
(2) "New National Survey Reveals What Consumers Know and Don't
Know About Changing Credit Score Marketplace." Consumer
Federation of America Press Release. February 28, 2011.
http://www.consumerfed.org/pdfs/Credit-Scores-Vantage-PR-2-28-11.pdf
(3) "Survey Shows Access to Mortgages Seen as a Serious National
Problem." Move, Inc. Press Release. February 8, 2011.
http://news.move.com/index.php?s=11609&item=25809
(4) comScore media Metric, January
2011
SOURCE Move, Inc.