A survey by Ipsos found that the American public is still somewhat confused about what is required to qualify for a home mortgage loan in todayâs housing market. There are two major misconceptions that we want to address today.
1. Down Payment
The survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 40% of consumers think a 20% down payment is always required. In actuality, there are many loans written with a down payment of 3% or less. Many renters may actually be able to enter the housing market sooner than they ever imagined with new programs that have emerged allowing less cash out of pocket.
2. FICOÂ® Scores
The survey also revealed that 62% of respondents believe they need excellent credit to buy a home, with 43% thinking a âgood credit scoreâ is over 780. In actuality, the average FICOÂ® scores of approved conventional and FHA mortgages are much lower. The average conventional loan closed in February had a credit score of 752, while FHA mortgages closed with a score of 686. The average across all loans closed in February was 720. The chart below shows the distribution of FICOÂ® Scores for all loans approved in February.
âIf you are a prospective buyer who is âreadyâ and âwillingâ to act now, but are not sure if you are âableâ to, sit down with a professional who can help you understand your true options.