A recent Fannie Mae Housing Working Paper reports on the level of consumer knowledge about qualifying for a home purchase mortgage loan. Using nationally representative survey research conducted during 2015, the authors find that overall consumer knowledge is quite weak. In particular, a high percentage of respondents don’t know: (1) the minimum down payment; (2) the minimum credit score; or (3) the maximum debt-to-income ratio, all key elements of the underwriting process. Moreover, among those respondents who think they do know, the minimum down payment and credit score are believed to be much higher than they actually are. These results persist even among renters who plan to buy a home during the next five years. In general, many respondents are concerned that it will be very difficult to get a mortgage. The authors relate results to other research on financial literacy more broadly and investigate channels by which consumers might improve their understanding of the mortgage process.
How Much Do U.S. Households Know About Qualifying for a Mortgage? – Working Paper, May 25, 2017