The widespread myth that perfect credit and large down payments are necessary to buy a home are holding many potential home buyers on the sidelines. According toEllie Mae’slatestOrigination Report, the average FICO score for all closed loans in May was 724, far lower than the 750 or 800 that many buyers believe to be true.
Below is a graph of the distribution of FICO scores of approved loans in May(the latest available data):
Looking at the chart above, it becomes obvious that not only do you not need a 750+ credit score, but 54.9% of approved loans actually had a score between 600 and 749.
More and more experts are speaking up about the fact that if potential buyers realized they could be approved for a mortgage with a credit score at, or above, 600, the distribution in the chart above would shift further to the left.
Ellie Mae’s Vice President, Jonas Moeencouragedbuyers to know their options before assuming that they do not qualify for a mortgage:
“The high median credit score is due to many millennials believing they won’t qualify with the score they have - and are therefore waiting to apply for a mortgage until they have the scorethey thinkthey need.”(emphasis added)
CoreLogic’slatestMarketPulseReportagrees that the median FICO score does not always tell the whole story:
“The observed decline in originations could be a result of potential applicants being either too cautious or discouraged from applying, more so than tight underwriting as the culprit in lower mortgage activity.”
It’s not just millennials who believe high credit scores and large down payments are needed. Many current homeowners are delaying moving on to a home that better fits their current needs due to a belief that they would not qualify for a mortgage today.
So what does this all mean?
Moe put it this way:
“Many potential home buyers are 'disqualifying' themselves. You don't need a 750 FICO Score and a 20% down payment to buy.”
If you are one of the many Americans who has always thought homeownership was out of their reach, meet with a local real estate professional who can help you start the process of being pre-qualified to see if you are able to buy now!
Author:Scottie Smith II Phone: 214-971-3915 Dated: July 14th 2016 Views: 165 About Scottie: "My goal is simple...To help People. My commitment to help is fueled by my passion to make a differe...
View our latest blog posts in your RSS reader. Click here to access.
WHO WE ARE
SCOTTIE SMITH II & ASSOCIATES is one of Dallas/Fort Worth’s fastest growing boutique brokerage firms. We are located in the historic Deep Ellum District of Dallas, Texas and focus on addressing the needs of home buyers, sellers, and investors. We do more than close real estate transactions; we help our clients build wealth and restore communities!
#1 Answer to the Housing Shortage: New ConstructionThe biggest challen
"After going through a failed sale, a business partner introduced me to Scottie. He came over and did a walkthrough and presented me with statistical data on my house and neighborhood. Scottie had complete confidence that my would sell in no time. He was right! I was very impressed with the amount of traffic my house received, not to mention the contract. Scottie and his team were A1 and professional! After completing some "to-do" items for him and the buyers, I signed the paperwork and closed the sell of the house to the new home owners today! Smoothest process ever!"