The Urban Institute recently released a report entitled, “Barriers to Accessing Homeownership: Down Payment, Credit, and Affordability,” which revealed that, “Consumers often think they need to put more money down to purchase a home than is actually required. In a 2017 survey, 68% of renters said saving for a down payment is an obstacle to becoming a homeowner. Thirty-nine percent (39%) of renters believe that more than 20% is needed for a down payment and many renters are unaware of low–down payment mortgage programs.”
Myth #1: “I Need a 20% Down Payment”
Buyers often overestimate the down payment funds needed to qualify for a home loan.
According to the same Urban Institute report:
“Most potential homebuyers are largely unaware that there are low-down payment and no-down payment mortgage assistance programs available at the local, state, and federal levels to help eligible borrowers secure an affordable down payment.” This myth about down payment amounts do not differ much between non-owners and homeowners. For example, “30% of homeowners and 39% of renters believe that you need more than 20 percent for a down payment.”
While many people believe they need at least 20% down to buy their dream home, they do not realize that there are programs available which allow them to put down as little as 3%. Many renters may actually be able to become a homeowner much sooner than they ever imagined with subsidy programs that allow 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 for a home mortgage. Many Americans believe a ‘good’ credit score is 780 or higher.
As you can see in the chart above, 51.7% of approved mortgages had a credit score of 600-749.
If you are buying your first home, knowing your credit and down payment options will make the mortgage process easier. Your dream home may already be within your reach.
Visit us at hfamiami.com/homebuyers to learn about our first-time home buyers’ mortgage, low interest rates and down payment assistance program.
Note, information in this post was derived from Keeping Matters Current.