February 12th, 2015
Many prospective homeowners are ready to make the transition from renting but fall short in one of two key areas.
These areas tend to be creditworthiness and down payment savings, The Atlantic reported. Some borrowers have the income and savings to afford a home but lack credit scores that reflect their ability to repay a loan. Others have stable income and credit but can’t afford to supply the traditional 20 percent down payment. Experts believe these barriers indicate Americans need more assistance from policymakers.
“The majority of first-time homebuyers may not be able to come up with a 20 percent down payment,” Sarah Edelman, a housing expert at the Center for American Progress told the news outlet. “For the future health of the housing market, we must make sure families who can afford to buy a home do.”
Current measures to improve homeownership rates
The Atlantic noted there has been a multipronged effort, including both public and private organizations, to help Americans have an easier path to owning a home. Credit reporting bureaus TransUnion and Experian, for example, announced they began allowing landlords to report tenants’ rent payments to help renting consumers boost their credit scores.
In the public sector, the Federal Housing Administration lowered mortgage insurance premiums. Additionally, Fannie Mae and Freddie Mac now offer home loans with down payments as low as 3 percent. With these benefits and the many incentives homebuilders are offering to buyers to boost new home sales, various avenues have opened up for consumers looking for more affordable ways to transition from renting to owning.
Homeownership still a major investment
Even with the aforementioned policy changes, Edelman and Urban Institute Senior Research Associate Brett Theodos believe more measures are necessary, according to The Atlantic. Many consumers still want to be homeowners, and ownership continues to offer financial benefits for Americans, particularly in regard to growing equity.
“It is a forced saving mechanism, and if you don’t have to think about saving, it goes better,” Theodos told the news source.
With the latest Trulia Price Monitor showing asking prices jumped 7.5 percent year over year in January, it’s no surprise consumers currently see a home as an investment that can appreciate over time. Additional assistance from private and public organizations could be the support Americans need to achieve their dreams.