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 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
NAR’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 adown payment of 3% or less.
Many renters may actually be able toenter the housing market soonerthan they ever imagined with new programs that have emerged allowing less cash out of pocket.
An Ipson survey revealed that 62% of respondents believe they need excellent credit to buy a home, with 43% thinking agood credit scoreis over 780. In actuality, theaverage FICOscoresof 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.The chart below shows the distribution of FICOScores for all loans approved in August.
If you are a prospective buyer who is ‘ready’ and ‘willing’ to act now, but are not sure if you are ‘able’ to, let’s sit down to help you understand your true options.