A recent IPSOS survey found that 45% of potential buyers think you need a credit score over 780 to get a mortgage to buy a home. In actuality, the average FICO score for an FHA loan is 689 and for a conventional loan it is 757. These are averages, so that means loans can be secured with credit scores significantly lower than that.
As your credit score goes down, however, your interest rate is likely to go up. Check out Leslie's tips on how to raise your credit score…
Another common misconception is how big a down payment you need to buy a home. Many potential buyers think a 20% down payment is needed to buy a home when reality is that many homes are purchased with only 3% down… sometimes even less.
According to a survey from Digital Risk, 64.2% of buyers aged 18-34 had a down payment of less than 20%, and 36% put down 5% or less. For example, Fannie Mae's HomeReady program designed for credit worthy, low to moderate income borrowers only requires 3% down. And there are also many city programs, such as Eden Prairie's down payment assistance program which can provide up to $25,000 in assistance.
Bottom line is, don't assume. Talk to a mortgage professional to find out what your options are. And if you find you aren't quite ready to become a homeowner yet, make a game plan so you know what to do to get there in the future!
Sharlene Hensrud, RE/MAX Results