High Percentage of Renters Do Not Have Enough Credit and Income to Buy a Home

Home loan spelled out with Scrabble game pieces
Photo credit: airpix




Zillow just released an analysis of home buying potential among renters and it determined that only 14% of Americans living in rental housing have the income and credit worthiness to buy a median-priced home in their markets.

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Incomes and credit scores of in-the-market renters were examined during the first six months of this year along with median rental, competition and home values in each region. Depending on the market, Zillow analysis determined several trends; in markets where homeownership was lower, there were higher proportions of renters with high incomes and strong credit. In markets with higher homeownership rates and in areas that recovered more slowly from the housing crisis, there were lower percentages of renters with high incomes and strong credit.

For example, in Denver, one of the cities where PEMCO Realty has an office, 16.2% of renters have a sufficient credit score and income to buy a median-priced home in the market. In Atlanta, another PEMCO Realty city, ranked lower on Zillow’s list, where only 9.3% of renters have a sufficient credit score and income for purchasing a median-priced home in that market.

All of this rising popularity, while good for leasing managers and property owners, might not be good for inventory and affordability. According to economists at the Urban Institute, there is likely to be a rental housing shortage soon, which will drive prices higher. With nearly 60% of all households formed between 2010 and 2030 renting, this mad rush to rent will cause an affordability crisis.

So if you’re in the 86%, what should you do to join the 14%?

Create a savings plan and spend less

Having money for the down payment and emergencies are key. If you don’t have this money now, you can do things to earn more or spend less such as cutting costs or getting a second job.

Improve your credit score

Credit score determines you getting approved and if you are, how much you’ll pay for your mortgage. If your score is low, you can do things to help raise it such as paying your bills on time. Balances owed in proportion to credit limit comprises 30% of your credit score and actually paying on time is 35% of your score.

Research alternative loan programs

The 10% down loan is not the only one out there, there are 3% down programs from Bank of America, Fannie Mae and Freddie Mac. FHA has a loan with a 3.5% down payment, but it requires PMI for the life of the loan unless you’re able to refinance. Research if there are income restrictions or if private mortgage insurance (PMI) is required.

To learn about these and other ways to get started in participating in the American dream of homeownership, contact a PEMCO Realty real estate professional in Atlanta, Denver or Honolulu today.



National Mortgage Professional. Survey: 14 Percent of Renters Can Afford to Buy Houses

Clark. 86% of renters can’t afford to buy a home: Here’s how you can prepare



Written by Ari Meier





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