Four Credit Misperceptions Damping Housing Demand

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BALTIMORE, July 26 2022 (GLOBE NEWSWIRE) — The U.S. housing market has cooled significantly as housing affordability deteriorates in the face of rising interest rates and historically high real estate costs. As a result, consumers are losing confidence in their ability to afford a home. According to CreditXpert, however, this may not be true for most consumers. The company’s analysis of more than 20 million credit calls over the past 12 months suggests that four key misconceptions thwart the dream of home ownership for many.

“Fast-changing mortgage and property markets are making national headlines, with homeownership stories out of reach for millions. Unfortunately, many would-be homeowners lack the knowledge to navigate the fast-moving and complex financial products like mortgages,” said Mike Darne, Vice President. President of Marketing for CreditXpert. “The truth is, there are concrete things potential buyers can do to help neutralize the impact of rising rates and house prices.”

Darne said these four credit misconceptions hold many applicants back:

“Consumer” vs. “Mortgage” credit scores. Most consumers are unaware that lenders use different credit scores for different types of loans. The ones that consumers regularly monitor are likely more aligned with typical consumer loans, like credit cards. Since mortgages are for much larger amounts, are secured by their home, and are paid off over a much longer period of time, the credit scores used by mortgage lenders use variables that reflect these differences.

Mortgage applicants have to live with the credit score their mortgage lender shows them. Not so. Applying for a mortgage can be daunting. Most applicants don’t know what they don’t know and end up accepting their assigned credit score. Yet, it is important that applicants and lenders strive to optimize credit scores because credit scores determine the interest rate, payment, and loan products offered to applicants.

Improving mortgage credit scores takes a long time. Not necessarily, and not for most consumers. Most applicants will take quick and easy steps to improve their score while their mortgage is being processed.. For the 12 months ending June 30, 2022, data shows that 73% of those with scores below 760 could improve their score by at least 20 points within 30 days, well within the mortgage origination cycle typical.

Improving credit ratings will not have much impact on affordability. Not so. Credit scores are the “quick action” variable in mortgage approvals. Higher credit scores often translate to lower loan rates, lower private mortgage insurance (PMI) costs, and better loan products. Reducing mortgage payments by even $100 per month significantly reduces total interest costs over the life of a loan. It also increases affordability.

The truth is, many potential buyers who believe they’ve been shut out of the housing market can actually qualify for a mortgage when those misperceptions are dispelled and they take simple steps to improve their credit scores.

“Our data shows that millions of Americans have the potential for more affordable mortgage financing. Lenders can show them how with a one-page report,” Darne concluded.

About CreditXpert

CreditXpert was founded in 2001 with a mission to make home ownership more accessible and affordable for everyone. The company’s predictive analytics platform helps mortgage originators and their applicants realize applicants’ credit score potential by generating a highly accurate and detailed action plan. Since its creation, the CreditXpert platform has analyzed nearly one billion credit files. Today, most of the top 10 mortgage originators and over 60,000 mortgage professionals leverage the company’s platform. Learn more at http://www.creditxpert.com.

CreditXpert Action Plans are tools intended to educate mortgage professionals and potential consumer loan applicants and are not provided for the purpose of improving credit report, credit history or credit rating. applicant’s credit, or to delete or alter any adverse, inaccurate, fraudulent or other information in an applicant’s credit file. CreditXpert is not a credit counseling, credit repair or credit reporting agency. CreditXpert credit scores and score changes are estimates and will likely differ from credit score information used by mortgage professionals to assess loan eligibility. CreditXpert does not guarantee that another company’s scores will change by the same amount, in the same way, or at all.

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