Do you need perfect credit to get a mortgage? Most home buyers think they do. But in reality you don’t need perfect credit in order to qualify for a mortgage, you just need good credit. In 2013, the average credit score of people who qualified for a mortgage was 743. In the early part of 2017, the average credit score has fallen to 723. In looking at the same time period, FHA mortgage scores have decreased from 697 to 683.
Most home buyers are saying “What about the down payment? It’s difficult to save the 15% to 20% necessary to get a mortgage”.
Well, most of these home buyers are wrong!
It used to be that a 20% down payment was normal. But lately that trend has been changing and most buyers are making smaller cash down payments. In May 2017, 71% of buyers purchased a home with a down payment of less than 20%. And 60% of those home buyers put down less than 6%!
Yes, when you make a down payment of less than 20% you will be paying some kind of mortgage insurance. But if you need to choose between paying mortgage insurance and not owning a home, most buyers these days will pay the mortgage insurance. Because the alternative is to continue to be a tenant.
Adding to the equation is that, according to a survey by Rent.com, 88% of property managers have raised their rents in the past 12 months. And it seems that this trend will continue. And many of these property managers are likely to bring in new tenants and charge them a higher rate instead of renegotiating a new, higher paying lease with an existing tenant. The likelyhood of ever rising rents can ease the pain of having to pay mortgage insurance
Here are the CliffNotes –
88% of property managers have raised the rental in the past 12 months
You need good credit to get a mortgage, not perfect credit
Many people can get a mortgage with less than 6% down
Also – interest rates are still at historically low levels, although they are starting to rise. In many cases it’s less expensive to own a home than to rent.
To learn more contact Bunny and Art.