Qualifying quandary: The fear that keeps people from buying homes
"For quite a few loans, the required FICO scores range anywhere from 620 to 680," Reynolds says. "The misperceptions are that it is harder to get a loan, the required debt-to-income ratio is too high, they think their FICO score is too low."
Instefjord, however, sees some ways in which qualifying could be stiffer.
"For instance," she says, "there are no longer stated income loans — a buyer has to show proof of all income from their employer. There is some rating of buyer quality that has to do with the down payment — a buyer with a greater down payment is less of a risk and so will get a lower interest rate."
John P. Evans, a sales associate at Gloria Nilson & Co. Real Estate in Pt. Pleasant Beach, New Jersey, also says lenders are looking more closely at a prospective buyer's income. "They look at more detail," he says. "They are more and more strict with the rules."
Evans also says that while the process may be tougher, more people are applying as the economy improves — which means more people are being approved.
A phone call to a mortgage lender, Instefjord says, can be the first step to qualifying for a home loan. "Answer a few questions about employment history, salary and debt and a good lender can tell them if they can qualify financially," she says. "The next step would be to have the lender pull a credit report to be sure their credit is adequate to qualify for the type of loan and the down payment required."
A credit report may cost about $50 or $60, and the process may take 30 minutes.
And what do people do if they find out they don't qualify?
"Find out why," Reynolds says. "If you work to clean up your credit, or need a longer credit history, or if you need to wait a few months or years to save up for a larger down payment, don't give up."
She acknowledges that getting one's financial house in order isn't fun and is sometimes tedious.
"But if we really think of it as a preparatory step that can help you achieve your financial, your investment and your lifestyle goals, it can be a motivator," Reynolds says.
What to buy
Evans says a bigger concern might be if a person does, in fact, qualify for a loan.
"Mortgage people love to tell you how much you qualify for," he says.
But he says people need to make sure to factor in the rest of their financial life — their monthly budget and so forth.
"Buy well below what you qualify for," he says.
In Austin, Alison Keith continues to work as a nurse and a mom and thinks about the quality of schools and the proximity a potential home could have to work.
"We made a lot of financial mistakes early on in our marriage but have been working hard to make things better for our son and ourselves," she says. "Getting me through school was part one of our plan. Having a home of our own with a low, set monthly payment and putting my husband in school are next on our list."
Maybe Keith does know where to begin after all.