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
to Ellie Mae's latest Origination 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 Moe encouraged
buyers 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 score they think they need." CoreLogic's latest MarketPulse Report agrees
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."
Bottom Line
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!
Looking to Buy, Sell, or Invest? Contact:
David Demangos
858.232.8410
Locally Known, Globally Connected
Luxury Home Marketing Specialist
Global Property Specialist
David@AwesomeSanDiegoRealEstate.com
Our Team Goes to Extremes to Fulfill Your Real Estate Dreams!
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