According to a survey by Ipsos, some Americans are still confused on requirements needed for a home mortgage in the housing market today. We will discuss two of the misconceptions.
1. Down Payment
Buyers tend to overestimate how much they need to qualify for a mortgage. The survey uncovered that 40% of buyers believe that a 20% down payment is needed. However, there are many loans given with a down payment of 3% or less. Great news for consumers who are confused on requirements for a home loan.
With new programs popping up, people renting are able to enter the housing market sooner than originally thought. These programs offer less up front cash.
2. FICO® Scores
The survey also uncovered that 62% of respondents thought they needed excellent credit to purchase a home. A large amount of the buyers in this survey ,43% of them, think a “good credit score” is over 780. So buyers are not confused on requirements, the reality is that the average FICO® scores of approved FHA and conventional loans are considerably lower.
In February, the average conventional loan had a credit score of 752, FHA mortgages closed with a score of 686. An average credit score of 720 spans across all loans that closed in February. Below is a chart showing the distribution of FICO® Scores for every loan accepted in February.
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.
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