In a recent article, First American shared how millennials are not really any different from previous generations when it comes to the goal of homeownership. It’s still a huge part of their American Dream.
The piece, however, also reveals that saving for a down payment is one of the biggest obstacles faced by first-time home buyers. Dispelling the 20% down payment myth could open the path to homeownership for many more.
Myth #1: “I Need a 20% Down Payment”
Buyers often overestimate how much they need to qualify for a home loan. According to the same article, Americans still overestimate the qualifications needed to get a mortgage. Resulting in qualified potential buyers not even considering homeownership.
The report also revealed that 16% of consumers believed that the minimum down payment required by lenders is 20% or more. Another 40% didn’t know at all.
While many potential buyers still think they need to put at least 20% down for the home of their dreams. They often don’t realize how many assistance programs are available with as little as 3% down. With a little research, many renters may actually be able to enter the housing market sooner than they ever imagined.
Myth #2: “I Need a 780 FICO® Score or Higher”
In addition to down payments, buyers are also often confused about the FICO® score it takes to qualify for a mortgage. Believing a ‘good’ credit score is 780 or higher.
To debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans:
As indicated in the chart above, 50.23% of approved mortgages had a credit score of 500-749.
Bottom Line
Whether buying your first home or moving up to your dream home, knowing your options will make the mortgage process easier. Believe it or not – your dream home may already be within your reach.