Home mortgages may be a little easier to get, but the public hasn't gotten the memo.
Fifty-three percent of would-be borrowers said getting a loan today is tougher than it was a year ago in a recent survey by loanDepot, a lender in Irvine, Calif., and OmniTel. The latter firm, a division of GfK Custom Research North America based in New York, conducted the survey of 1,005 consumers 18 or older between March 21 and March 23.
Consumers seem to have this opinion despite the fact that the average mortgage application approval rate was just over 55% in 2013 compared to 49% in 2012, according to the most recent data from origination technology firm Ellie Mae in Pleasanton, Calif.
Nevertheless, 56% of consumers who don't own a home today but want to are not even bothering to check on whether they could qualify for loans because they fear rejection, according to loanDepot.
Borrowers' fears have some basis in reality but they are failing to notice recent improvements in the market, loanDepot's new president and COO, Dave Norris, says in a report to be released Tuesday.
Market and regulatory developments have made it harder for borrowers to secure loans than before the downturn, he acknowledges. But consumers also should realize it is easier than ever to research the loan options they may qualify for online, and that loan criteria are looser than a year ago.
Part of the problem is likely that consumers fail to understand those criteria and what their role in the origination process is, says Roger Beane, CEO of the Orange, Calif., appraisal and asset management firm LRES Corp. He has refinanced two of his own home loans in the past six months.
"All the way through the process it was, 'I need more information here. I need more information here. I need more information.' I'm in the industry, I know how this works," he says. "If I was a consumer, I'd ask, 'Why do you need this?'"
Lenders have relaxed credit score requirements needed to get a loan, for example, but the significance of that development seems to be escaping a relatively large percentage of borrowers.
Half of survey respondents lack knowledge of what minimum credit score lenders generally require for most loans. Also, 40% of consumers who want to buy a home have decided against pursuing a purchase because they lack that knowledge, the survey finds.
Lenders and other mortgage market participants need to provide more consumer education to address the concern, Beane says.