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What Do You Need to Qualify for a Mortgage?

It appears that there is still a lot of confusion about what is really necessary to qualify for a mortgage loan these days. Digital Risk surveyed 1,344 millennials about requirements to qualify for a mortgage. Their results may surprise you.

How to qualify for a mortgage

 

DOWN PAYMENT
36% of respondents believe a 20% down payment is required to meet mortgage qualifications.

MYTH – You must put a 20% downpayment on a home.

 

FACT – Some mortgage programs require as little as 0% down.
22% of all mortgages taken out in December 2015 were FHA loans, which require a 3.5% down payment.

26% of the millennials surveyed ended up putting down between 1 – 5% on their home.

 

FICO

Two-thirds of respondents over-estimated FICO Score requirements, believing that you must have a “very-good” credit score to buy a house.

MYTH – 45% think a “good” credit score is 780

FACT – “Good” credit is closer to 680

According to Ellie Mae, the average FICO score for homebuyers using FHA financing is 687.
Some Lenders offer FHA financing to borrowers with credit scores as low as 580.
 

The results of the survey point to a noticeable disconnect between the general public and the requirements to purchase a home. This is surprising when you think about how significant the decision to purchase a home is. The difference between perception and reality was significant.

When asked what their primary concerns were during the home shopping experience, 43% said that the “overall home affordability” was the biggest concern. They were given the ability to choose up to 3 answers.

43.27% overall affordability
34.83% coming up with a down payment
28.76% closing costs
23.48% getting mortgage approval
21.64% financial stability
20.05% committing long-term
16.09% dealing with banker, real estate agent
15.04% home price volatility
14.51% job stability

Summary
Informing potential homebuyers on the actual costs involved ahead of time can help to alleviate some of the unwarranted financial concerns they are clearly having. Purchasing a home is not an impulse transaction. Buyers need to feel comfortable making the leap from renter to owner. The more informed they are, the more likely they are to do so. 

CanIBuyIt
CanIBuyIt is dedicated to informing homebuyers on their financing budgets.

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