TheÂ Aspiring Home Buyers ProfileÂ from theÂ 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 the main reason why non-homeowners do not own their own homes is because they believe that 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 Americans who plan to buy or have already bought a home admit to their concerns about their ability to afford a home in the current market. In addition, 46% are currently unfamiliar with alternative down payment options, and 46% of millennials do not feel confident that they could currently afford a 20% down payment.
What these people donâ€™t realize, however, is that there are many loans written withÂ down payments 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.
AnÂ IpsosÂ survey revealed that 62% of respondents believe they need excellent credit to buy a home, with 43% thinking a â€œgood credit scoreâ€?Â is over 780. In actuality, theÂ average FICOÂ®Â scoresÂ for approved conventional and FHA mortgages are much lower.
The average conventional loan closed in May had a credit score of 753, while FHA mortgages closed with an average score of 676. The average across all loans closed in May was 724.Â The chart below shows the distribution of FICOÂ®Â Scores for all loans approved in May.
If you are a prospective buyer who is â€˜readyâ€™ and â€˜willingâ€™ to act now, but you are not sure if you are â€˜ableâ€™ to, letâ€™s sit down to help you understand your true options today.
Source: Keeping Current Matters