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 today’s 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. FICO® Scores
The survey also revealed that 62% of respondents believe they need excellent credit to buy a home, with 43% 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 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 FICO
® Scores for all loans approved in February.
Bottom Line
If you are a prospective buyer who is ‘ready’ and ‘willing’ to act now,
but are not sure if you are ‘able’ to, sit down with a professional who
can help you understand your true options.
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