Today we are excited to talk about both the perceptions, and realities, of homeownership in Northern Virginia. The National Association of Realtors recently released a report saying Americans at every age and income level agree that homeownership is both a smart financial decision, and part of the American dream. We’ve talked about some obstacles to homeownership in the past, but as studies like this have shown, many obstacles are perceived. They aren’t real.
A recent study by Fannie Mae revealed that many consumers are either unsure or misinformed regarding the minimum requirements to obtain a mortgage. We are going to break down three such challenges today.
- Down payment perceptionsMany renters have mentioned that the lack of an adequate down payment is the thing that most prevents them from buying. According to the Fannie Mae report mentioned above, 40% of all renters don’t know what kind of down payment is required, while 15% think you need at least 20% down and 4% believe at least 10% down is required. The reality is, there are tons of programs out there from Fannie Mae, Freddie Mac, and FHA that offer 3% down programs. VA and USDA loans offer 0% down programs. The average down payment for a first-time buyer is 6%.
Credit score perceptionsMany renters have also mentioned that the lack of a good credit score is the thing preventing them from buying. According to the same Fannie Mae report, 54% of all renters don’t know what credit score is required, and 5% think you need at least a score of 740. Actually, many mortgages are granted to purchasers with a score below 700. The average credit score for FHA loans is 687, and the average score on all loans is 722.
Debt-to-income ratio perceptionsMany renters say they carry too much debt, but 59% of renters surveyed by Fannie Mae don’t even know what ratio is acceptable. Lenders like to see a back-end ratio that does not exceed 36% of the buyer’s stable monthly income.
All of this leads us to the bottom line: Don’t let a lack of knowledge or misinformation keep you from buying this year. If you don’t know where to start, or have any other questions about the market, we would be glad to help. Give us a call or send us an email. We look forward to being in touch!