How can borrower education change the current state where the housing market leaves many qualified homebuyers priced out? On average, homes are becoming more costly with time, and the affordable ones are getting shorter in supply. Due to this, many potential homebuyers consider that they lack the economic power to qualify for homeownership. This belief is unfounded since borrower education can equip any interested buyer with the required skills and knowledge.
Borrower education will help you to:
Develop Awareness of Lower Down-Payments
In a recent survey, the researchers asked potential homebuyers to explain how they can take advantage of the current mortgage process to secure cheaper loans. Seventy-three percent of the respondents were not aware of the 3-to-5% down payment option.
Ironically, at least 31% of the respondents cited costly down payment as one of the significant factors that make housing unsustainable.
With efficient borrower education, many potential homebuyers who can’t make substantial down payments will discover that they can buy homes.
Understand the Minimum Credit Score
The 2018 Fannie Mae survey aligns with the above findings. Moreover, it provides that lack of knowledge of the minimum credit score is another major problem. In the survey, the majority of the 3 000 respondents overestimated the required credit score. So, if borrower education equips potential homeowners with the correct information on credit score, most of them can purchase affordable homes.
Discover the Best Tips on Timely Repayment
The default rate has been increasing over the years. Part of the reason for the increase in this is the lack of financial literacy. Many students and youths rush to secure mortgages before securing the required knowledge. In the end, some of these individuals default, and this increases the cost of their mortgages.
Borrower education can help to minimize this since it equips potential homeowners with the necessary budget management skills. For example, they help these individuals to understand the benefits of starting small. Some young people want to buy their dream home when they are not ready for it. When trained on building equity and developing careers, new homeowners can build bigger homes in 6-10 years without incurring costly loans.
Embrace the Saving Culture
Mortgages offer many people the opportunity to own homes within a short period. But buying a home with cash has more advantages than it.
Borrower education can help individuals to understand the difference. If you secure a mortgage, you should pay monthly for several years, which comes with some risks.
Some people who understand the risks and have reliable sources of income opt to save for 3-to-5 years and then purchase debt-free homes. Others with the same privileges don’t achieve the same goal due to the lack of proper education.
Capitalize on New Provisions
Due to the current health and economic challenges, mortgage borrowers can help you to get many relaxations.
You can take advantage of them to make your mortgage payments smoother and cheaper. The recent move by President Biden to extend the payment pause and interest accrual on all federal student loans is an example of what you can expect.
If the extension culminates into student loan forgiveness, some students and parents could use the money to buy their homes. Some of them can also pay off their debt and qualify for cheaper mortgages.
As already mentioned, a poor credit score can increase the cost of mortgages and other loans.
It’s worth repeating that you have plenty of ways to access affordable loans. All you need to do is know what your banks have in store for you and how you can get the best offer. So, the best way to make housing more attainable could be to increase access to professional borrower education.