From the Washington Post:
Many renters who want to buy a home might not even try to because they fear that they won’t qualify for a mortgage, researchers at the Federal Reserve Bank of New York concluded Monday after analyzing the results of a consumer sentiment poll.
The renters on average said they had a 63 percent chance of moving during the next three years, but only 44 percent would buy a home if they moved. Those who were reluctant to buy cited traditional reasons, including not enough savings or income. But a sizeable portion (41 percent) also said they were worried that their credit scores would not pass muster. (Note that the 344 renters surveyed could check more than one reason for not buying.)
As we wrote Sunday, lenders have shied away from extending mortgages to less-than-stellar borrowers in a bid to shield themselves from financial penalties and lawsuits. They’re demanding higher standards from borrowers seeking government-backed loans than even the government requires. And policy makers fear that the lack of access to credit is hurting the housing market’s recovery.
But even if the lenders were to ease their credit standards, it’s unclear whether many renters would bother to apply for a mortgage, according to researchers Andreas Fuster, Basit Zafar and Matthew Cocci. In their analysis, they concluded that many potential buyers with relatively low credit scores (meaning below 680 in this analysis) feel “discouraged,” convinced that they would not qualify for a loan.
Of course, if lenders eased up, perhaps consumer perceptions would change. But for now, about two-thirds of the renters surveyed said it would be somewhat or very difficult for them to get a mortgage. The chances of buying a home for those who think it would be tough to get a mortgage are about half what they would be for those 5 percent who think securing a loan would be easy, the analysis shows.