Can You Qualify for a Mortgage?
There is a widespread misconception that perfect credit and a 20% down payment is necessary to buy a home. This incorrect belief is keeping many potential home buyers in the renter’s rut. According to Ellie Mae’s latest Origination Report, the average FICO score for all closed loans in May was 724, far lower than the 750 or 800 that many buyers think they need.
Below is a graph of the distribution of FICO scores of approved loans in May. Not only do you NOT need a 750+ credit score, but 54.9% of approved loans actually had scores between 600 and 749!
Ellie Mae’s Vice President, Jonas Moe encouraged buyers to know their options:
“The high median credit score is due to many millennials believing they won’t qualify with the score they have – and are therefore waiting to apply for a mortgage until they have the score they think they need.”
It’s not just millennials who believe high credit scores and large down payments are required. Many current homeowners aren’t moving up to a home that better fits their needs due to the belief they cannot qualify for a mortgage.
So what does this all mean?
Jonas Moe put it this way:
“Many potential home buyers are ‘disqualifying’ themselves. You don’t need a 750 FICO Score and a 20% down payment to buy.”
Real Estate Bottom Line
If you think home ownership is out of your reach, let’s discuss the process of getting you pre-qualified. You may be able to buy a home now!