The Aspiring Home Buyers Profile from the National Association of Realtors (NAR)Â found that the American public is still somewhat confused about what is required to qualify for a home mortgage loan in todayâ€™s housing market. The results of the survey show that non-homeowners cite the main reason for not currently owning a home, as not being able to afford one.
This brings us to two major misconceptions that we want to address today.
1. Down Payment
NARâ€™s survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 39% of non-homeowners say they believe they need more than 20% for a down payment on a home purchase. In actuality, there are many loans written with aÂ down payment of 3% or less.
Many renters may actually be able toÂ enter the housing market soonerÂ than they ever imagined with new programs that have emerged allowing less cash out of pocket.
2. FICOÂ®Â Scores
An Ipson survey revealed that 62% of respondents believe they need excellent credit to buy a home, with 43% thinking aÂ â€œgood credit scoreâ€�Â is over 780. In actuality, theÂ average FICOÂ®Â scoresÂ of approved conventional and FHA mortgages are much lower.
The average conventional loan closed in August had a credit score of 752, while FHA mortgages closed with a score of 683. The average across all loans closed in August was 724.Â The chart below shows the distribution of FICOÂ®Â Scores for all loans approved in August.
If you are a prospective buyer who is â€˜readyâ€™ and â€˜willingâ€™ to act now, but are not sure if you are â€˜ableâ€™ to, letâ€™s sit down to help you understand your true options.
Source: Keeping Current Matters