Most home buyers are of the opinion that they need to have perfect credit to get a mortgage. And most home buyers are also of the opinion that they need to save 15 – 20% of the purchase price as their down payment.
These “Most Home Buyers” are wrong!
First let’s discuss the credit scores. In 2013, the average credit score of someone who took a mortgage to purchase a home was 743. That number has been dropping to the point where, so far in 2017, the average score is 723. In the same time frame, FHA mortgage scores have fallen from 697 to 683. This makes it obvious that one doesn’t need perfect credit in order to qualify for a mortgage, one just needs good credit
But what about the down payment? Where it used to be that 20% down payment was the norm, that trend has been changing to where most buyers are making smaller cash down payments. In May of this year, 71% of buyers made a down payment of less than 20%. And 60% of buyers put down less than 6%!
Yes, buyers with less than 20% down will be paying some kind of mortgage insurance, but it seems if they need to make a choice of not owning a home vs paying mortgage insurance, they will pay the mortgage insurance. Because the alternative is to continue renting.
According to a survey by Rent.com 88% of property managers throughout the country have raised their rents in the past 12 months. There does not appear to be any indication that this trend will not continue. Additionally these property managers stated they are likely to bring in new tenants who will be paying a higher rate instead of renegotiating a new, higher paying lease with a current tenant.
Here’s the recap:
88% of property managers have raised their rental rates in the past 12 months
You don’t need perfect credit to get a mortgage, just good credit
You don’t need to save 20% down payment, many people purchase with less than 6% down
And don’t forget – interest rates, although they are starting to rise a little, are still at historically low levels. This makes it less expensive to own a home than to rent in many instances.
Contact Bunny and Art to learn more