You Don't Always Need 20% Down

Eric Bell Estates - Watch Your Money

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 I 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.

Eric Bell Estates Fico Score Distribution

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, let’s talk and see how I can help you understand your true options.