You Don’t Need 20% Down to Buy Now!

It seems that the public is still somewhat confused about what is required to qualify for a home mortgage loan in today’s housing market. The results of the National Association of Realtors (NAR) Study found that the main reason that non-homeowners do not currently own a home is they don’t believe they can afford one. So what does affordability of a house mean? It’s not as straightforward as many other purchases that you make. Many years ago home loans were only for people with perfect credit and a 20% to 50% down payment. But that is not the case any more. When it comes to perceived affordability the two major misconceptions we should talk about are:
 1) Down Payment 
The NAR’s survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 39% of non-homeowner say they believe they need more than 20% for a down payment on a home purchase. Well, that used to be true a few decades ago, but that’s no longer the case these days. In actuality, there are many loans written with a down payment of 5% or less. Many new programs have emerged allowing less cash out of pocket. With an FHA or VA loan you can put 5% or less down and with down payment assistance programs, such as the Washington Bond loan program, you don’t need thousands of dollars in the bank, you can have a loan for your down payment attached as a second mortgage on your house and pay no down payment out of pocket. 
2) FICO scores 
The next big misconception is that you need excellent credit to buy a home. Most perspective home buyers think a “good credit score” is over 780. In actuality the average FICO scores of those who are approved for mortgages are much lower. The average FHA loan closed with a score of 683 in 2017.   Though it is possible to get a loan having credit in the 505-579 range, it is difficult to qualify and it is recommended that you work on increasing your credit score above 580. A 580 score is the minimum score most reputable mortgage lenders require for an FHA loan.
Conclusion 
If you have been thinking about purchasing a home and are ready, able and willing but not sure if you’re able to financially.  Sit down with a professional who can help you understand your true options.