You Do Not Need 20% Down To Buy A Home

The National Association of Realtors (NAR) released a report (The Aspiring Home Buyers Profile) which found that the American public is unsure what is required to qualify for a mortgage loan in todays real estate market. The survey shows that non-homeowners state the main reason they do not currently own a home is simply the inability to afford one.  Based on that study there are two major misconceptions people often have about qualifying for a mortgage.

1. Down Payment

The National Association of Realtor's report showed consumers overestimate the funds needed for a down payment to qualify for a home mortgage loan.  They reported 39% of non-homeowners believe they need more than 20% for a down payment to buy a home. The reality is there are a wide variety of loans written with a down payment of 3% or less.  The VA loan available to many veterans requires zero down payment.  There are also regional programs available for down payment assistance.  

2. Credit Rating

A survey done by Ipson revealed that a majority of people felt they needed an excellent credit rating to buy a home,  43%  thought a “good credit score” meant it had to be over 780. The truth is that most of the approved conventional and FHA mortgages are with much lower credit scores.

The average credit score for conventional loans closed in August was 752, while FHA mortgages averaged a score of 683. The average across all mortgage loans that closed in August was 724. This chart displays the distribution of FICO® Scores for all loans which were approved in August.