4 Mortgage Myths Worth Writing Off

4 Mortgage Myths Worth Writing Off (Source: Pixabay CC)

Now is a great time to get into a new home! Stop holding yourself back and get rid of these ideas: 

1."I need to have a really great credit score to buy my first home." 

According to the 2015 "How America Views Homeownership" survey by Ipsos, 45% of Americans believe that a "good credit score" is 780 and higher, while 2/3 of those surveyed believed that they needed a "very good credit score" to qualify for a mortgage. When holding those numbers together, it's easy to see that a good chunk of Americans feel that they are underqualified for homeownership. 

Fortunately, there's more to the story when it comes to your credit score. The American Enterprise Institute's International Center on Housing Risk’s May First-Time Buyer Mortgage Risk Index (FBMRI) found that 20% of first-time buyers had a score of 660 or lower, and the median FICO score for first-time buyers with agency mortgages was 705. For folks using FHA-insured loans, the median score was 672. 

By using the resources available to them, newcomers to the housing market can overcome their growing credit scores and secure mortgages for their first homes.

2. "My down payment needs to be at 20%."

This is a myth that we love busting, and so we'll take another opportunity to put it out there: The median down payment for first-time homeowners is about 3%, or $7200. By acting on the savings they have now, potential first-time homeowners can latch onto low interest rates and get into great homes. 

  • 70% of first-time buyer mortgages had a combined loan-to-value ratio of 95% or higher.

The loan-to-value ratio is a measure of a mortgage amount vs. the cost of the home. In the case of a 3% down payment, the loan-to-value ratio would be 97%. 

3. "A buddy told me that my debt-to-income ratio needs to be at a zero."

  • 25% had total debt-to-income ratios above 43 percent.

Debt-to-income ratios measure the amount of debt against income. For example, someone making $30,000 a year with $15,000 in college debt would have a debt to income ratio of 50%. 

4. "The market for first-time home buyers is pretty bleak." 

Actually, now is a great time to buy a first home. On a national level, the average rental is more expensive than a mortgage payment, and the numbers are growing further apart. 

Still don't believe us? Ask the experts!

When you're ready to begin the process of buying a home, there are specific steps that you need to take! The Real Group team would love to be a part of this experience and help you find a new place to call home, so drop us a line!

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