Don't let old myths stop you from buying your next home. It is still quite surprising how two old and out dated myths still haunt would be buyers. Do not keep paying rent to your landlord, pay your own mortgage instead. While renting does have some conveniences, it does not build wealth like home ownership does. Buying your next home starts to build your investment portfolio. It's no joke or a myth, it's a good time to act.
Fannie Mae's recent article, "What Customer (Don't) Know About Mortgage Qualification Criteria," showed that "only 5 to 16 percent know the correct ranges for key mortgage qualification criteria." Clearly, old myths are still around.
Myth #1 - A 20% down payment is required. Fannie Mae’s survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 76% of Americans either don’t know (40%) or are misinformed (36%) about the minimum down payment required.
Many believe that they need at least 20% down to buy their dream home, but many programs actually let buyers put down as little as 3%.
Myth #2 - I need a FICO score of 780 or higher. The survey revealed that 59% of Americans either don’t know (54%) or are misinformed (5%) about what FICO score is necessary to qualify.
Many Americans believe a ‘good’ credit score is 780 or higher.
To help debunk 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 below, 54.7% of approved mortgages had a credit score of 600-749. The illustration is provided by Keeping Current Matters.