The American public, according to the Aspiring Home Buyers Profile from the National Association of Realtors (NAR), is somewhat confused about what is actually required to qualify for a mortgage loan in today’s housing market. Survey results show those who do not currently own a home consistently cite the main reason for that being unable to afford one.
This brings up two major misconceptions to address right away.
1. Down Payment
The survey revealed consumers tend to overestimate the down payment necessary to qualify for a home loan, with 39% of non-homeowners believing they need more than 20% as a down payment on a home purchase. In truth, there are many loans written with a down payment of 3% or less!
Many renters are able to enter the housing market sooner than they imagined with new programs that allow much less cash out of pocket.
2. FICO® Scores
An Ipson survey revealed that 62% of respondents believe they need excellent credit to buy a home, with 43% thinking a “good credit score” is over 780. In actuality, the average FICO® scores for both conventional and FHA mortgages are much lower.
The average conventional loan closed in August had a credit score of 752, with FHA mortgages reaching even more applicants, at an average score of 683. The average across all loans closed in August was 724.
The bottom line…if you are ‘ready’ and ‘willing’ to jump into the housing market now, but not sure if you are ‘able’ to, let’s sit down to help you understand your true options.