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Purchasing Your First Home

You Do Not Need 20% Down To Buy A Home

     Buying your first home can be very exciting but make sure you are prepared for what lies ahead. When you are transitioning from being a renter to a homeowner there are many things you need to consider.

     The Aspiring Home Buyers Profile from the National Association of Realtors (NAR) found that the American public is still somewhat confused about what is required to qualify for a home mortgage loan in today’s housing market. The results of the survey show that the main reason why non-homeowners do not own their own homes is because they believe that they cannot afford them.

     This brings us to a few major misconceptions that we want to address today.

Down Payment

     A recent survey by Laurel Road, the National Online Lender and FDIC-Insured Bank, revealed that consumers overestimate the down payment funds needed to qualify for a home loan.

     According to the survey, 53% of Americans who plan to buy or have already bought a home admit to their concerns about their ability to afford a home in the current market. In addition, 46% are currently unfamiliar with alternative down payment options, and 46% of millennials do not feel confident that they could currently afford a 20% down payment.

     What these people don’t realize, however, is that there are many loans written with down payments of 3% or less. USDA and VA have no money down options.

     Many renters may actually be able to enter the housing market sooner than they ever imagined with new programs that have emerged allowing less cash out of pocket.

FICO Scores

     An Ipsos survey revealed that 62% of respondents believe they need excellent credit to buy a home, with 43% thinking a “good credit score” is over 780. In actuality, the average FICO® scores for approved conventional and FHA mortgages are much lower.

     The average conventional loan closed in May had a credit score of 753, while FHA mortgages closed with an average score of 676. The average across all loans closed in May was 724. The chart below shows the distribution of FICO® Scores for all loans approved in May.

     It is possible to get approved to purchase a home with a score as low as a 580 for VA or 600 for FHA. It is best to speak to your Loan Officer about the options available to you.

Can you afford the monthly payments?

     Even if you have saved enough money for your down payment, you need to be certain that you are able to afford your monthly mortgage payment. Do not forget to factor in expenses like property taxes, insurance, HOA fees, etc. We will go over your budget and your financial goals to make sure that you are comfortable with your mortgage payment and still have enough money each month to enjoy your life in your new home.

Bottom Line

     If you are a prospective buyer who is ‘ready’ and ‘willing’ to act now, but you are not sure if you are ‘able’ to, you need sit down with a reputable lender to discuss all of your options.


Greg Tanner, NMLS 1046498

2011-C 2nd Loop Rd. Florence 843.407.3464 |

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