A survey by Ipsos found that the American public is still somewhat confused about what is actually necessary to qualify for a home mortgage loan in today’s housing market. The study pointed out two major misconceptions that we 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, 36% 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.

There are many state and local down payment programs that can help with not only the down payment, but possibly the closing costs as well. Here in the San Francisco Bay Area, there are several programs available for First Time Home Buyers to help purchase a home. One program allows a First Time Home Buyer to purchase a $600k home with as little as 4 cents. Yes, not a typo. You can purchase a home for less than a nickel. There are some restrictions so please contact me for more details. If you would also like our Down Payment Assistance Cheat Sheet, please contact me as well. 

2. FICO Scores

The survey also reported that two-thirds of the respondents believe they need a very good credit score to buy a home, with 45 percent 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 March had a credit score of 753, while FHA mortgages closed with a 685 score. The average across all loans closed in March was 722. The graph below shows how the average FICO Score required has come down over the last 12 months and has stayed around 722 for the last six months.

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, contact us so that we can help you understand your true options. 

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Down Payment Assistance Programs