The Aspiring Home Buyers Profile from the National Association of Realtors (NAR) found that the American public is still somewhat confused about what is required to qualify for a home mortgage loan in today’s housing market. The survey shows that the main reason non-homeowners do not own their own homes is that they believe they cannot afford them.
This brings us to two major misconceptions that we want to address today:
1. Down Payment
A recent survey by Laurel Road, the National Online Lender and FDIC-Insured Bank, revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the survey, 53% of American perspective buyers admit to their affordability concerns in the current market. Additionally, 46% are currently unfamiliar with alternative down payment options. 46% of millennials do not feel confident that they could currently afford a 20% down payment.
What these people don’t realize, however, is that there are many loans written with down payments of 3% or less.
Many renters may actually be able to enter the housing market sooner than they ever imagined with new programs that have emerged allowing less cash out of pocket.
An Ipsos 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 approved conventional and FHA mortgages are much lower.
The average conventional loan closed in May had a credit score of 753. FHA mortgages closed with an average score of 676. The average across all loans closed in May was 724.
If you are ready to buy but are unsure if you are able to, contact us. We’re ready help you understand your true options today.