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    Real Estate you should know

    2 Major Myths Holding Back Home Buyers

    Urban Institute recently released a report entitled, “ Barriers to Accessing Homeownership, ” which revealed...

    • Alexis VanTilburg
    • February 22nd, 2018
    • 2 min read

    Urban Institute recently released a report entitled, “Barriers to Accessing Homeownership,” which revealed that “eighty percent of consumers either are unaware of how much lenders require for a down payment or believe all lenders require a down payment above 5 percent.”

    Myth #1: “I Need a 20% Down Payment”

    Often times, Buyers overestimate the down payment funds needed to qualify for a home loan.  According to the aforementioned report:   

    “Consumers are often unaware of the option to take out low-down-payment mortgages. Only 19% of consumers believe lenders would make loans with a down payment of 5% or less… While 15% believe lenders require a 20% down payment, and 30% believe lenders expect a 20% down payment.”

    These numbers do not differ much between non-owners and homeowners; 39% of non-owners believe they need more than 20% for a down payment and 30% of homeowners believe they need more than 20% for a down payment.

    While many believe that they need at least 20% down to buy their dream home, they do not realize that programs are available that allow them to put down as little as 3%. Many renters may actually be able to enter the housing market sooner than they ever imagined with programs that have emerged allowing less cash out of pocket.

    Myth #2: “I Need a 780 FICO® Score or Higher to Buy”

    Similar to the down payment, many either don’t know or are misinformed about what FICO®score is necessary to qualify.

    Many Americans believe a ‘good’ credit score is 780 or higher.

    To help negate this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans.

    As you can see in the chart above, 53.5% of approved mortgages had a credit score of 600-749.

     

     

     

    Source: Keeping Current Matters

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    About the author

    Alexis VanTilburg

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