Are The Obstacles To Homeownership Real Or Preceived

Are The Obstacles To Homeownership Real Or Preceived

A recent study by Fannie MaeWhat Do Consumers Know About The Mortgage Qualification Criteria?, revealed that many consumers are either unsure or misinformed regarding the minimum requirements necessary to obtain a mortgage. Let’s break down three such challenges.

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Down Payment


Perceptions


Many renters have mentioned that the lack of an adequate down payment is preventing them from moving forward with the purchase of a home. According to the Fannie Mae report:


  • 40% of all renters don’t know what down payment is required

  • 15% think you need at least 20% down

  • An additional 4% think you need at least 10% down


The Reality


There are programs offered by Fannie Mae, Freddie Mac and FHA that require as little as 3-3.5% down. VA and USDA loans offer 0% down programs. According to the National Association of Realtors, the typical down payment for a first time buyer is 6%.

Credit Score


Perceptions


Many renters have mentioned that the lack of an adequate credit score is preventing them from moving forward with the purchase of a home. According to the Fannie Mae report:


  • 54% of all renters don’t know what credit score is required

  • 5% think you need at least a 740 credit score


The Reality


Many mortgages are granted to purchasers with a credit score of less than 700. According to Ellie Mae, the average credit score on a closed FHA purchase is 687 and the average credit score on all loans is 722.

Back End Debt-to-Income Ratio (DTI)


Perceptions

Many renters have mentioned that they carry too much debt which is preventing them from moving forward with the purchase of a home. According to the Fannie Mae report:

  • 59% of all renters don’t know what DTI is acceptable

  • 25% think you need at under 25%

  • 7% think you need under 39%


The Reality


Lenders like to see a back-end ratio that does not exceed 36%. Fannie Mae’s maximum total DTI ratio is 36% of the borrower’s stable monthly income. The maximum can be exceeded up to 45% based on credit score and other requirements.


Bottom Line


Don't let a lack of knowledge or misinformation keep your family from buying a home this year. Meet with a local real estate professional who can evaluate if your ability to buy now!


Sherry Cabrera Headshot
Author:
Phone: 214-454-6969
Dated: January 8th 2016
Views: 646
About Sherry: Sherry was raised in Mississippi and moved to Dallas 16 years ago with her daughter. Prior to movin...

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