Down Payment Misconception
One More Time – You Do Not Need 20% Down To Buy
A survey by Ipsos found people are still somewhat confused about what is actually necessary to qualify for a home mortgage loan. The study pointed out two major misconceptions I want to address.
1. Down Payment
The survey revealed consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 36% think a 20% down payment is always required. In reality, there are many loans written with a down payment of 3% or less.
2. FICO Scores
The survey also reported two-thirds of the respondents believe they need a high credit score to buy a home, with 45 percent thinking a “good credit score” is over 780. In actuality, the average FICO scores of approved conventional and FHA mortgages are much lower.
The average conventional loan closed in March had a credit score of 753, while FHA mortgages closed with a 685 score. The average score across all loans closed in March was 722. The graph below shows the average FICO Score required has come down over the last 12 months and has stayed around 722 for the last six months.
Real Estate Bottom Line
If you are a prospective buyer who is ready to buy now, but are not sure if you are will qualify for a loan, sit down with a mortgage professional who can help you understand your options.