This brings us to two major misconceptions that we want to address today.
1. Down PaymentA recent survey by Laurel Road, the National Online Lender and FDIC-Insured Bank, revealed that consumers overestimate the down payment funds needed to qualify for a home loan.
According to the survey, 53% of Americans who plan to buy or have already bought a home admit to their concerns about their ability to afford a home in the current market. In addition, 46% are currently unfamiliar with alternative down payment options, and 46% of millennials do not feel confident that they could currently afford a 20% down payment.
What these people don’t realize, however, is that there are many loans written with down payments of 3% or less.
Many renters may actually be able to enter the housing market soonerthan they ever imagined with new programs that have emerged allowing less cash out of pocket.
2. FICO®ScoresAn Ipsossurvey 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® scoresfor approved conventional and FHA mortgages are much lower.
The average conventional loan closed in May had a credit score of 753, while FHA mortgages closed with an average score of 676. The average across all loans closed in May was 724. The chart below shows the distribution of FICO® Scores for all loans approved in May.