Many consumers aren’t aware of the various financing options available to homebuyers, or of the varying down payment requirements. On average, millennials believe the minimum down payment requirement is 21 percent, according to the survey; in reality, down payments can be as low as zero percent for VA loans, or can range from 3 to 5 percent for some Fannie Mae and Freddie Mac loans. The Federal Housing Administration (FHA) also provides loans with low down payment options.
There are various loans that cater to first-time buyers or those who don’t have a large sum of money to put down. The survey reports that 70 percent of adults don’t feel they have enough in savings for a down payment, but this may be attributed to a lack of mortgage industry knowledge. Seventy-three percent of people surveyed and 62 percent of millennial participants were unaware of down payment assistance programs for middle-income buyers.
Consumers should reach out to their local bank to find out if any loan options work for them. Making a few lifestyle changes is also a quick way to amass down payment funds.
The power of credit in the real estate industry is widely misunderstood among consumers. While the mortgage-qualifying rate is around the 620 range, homebuyers believe it is much higher. Twenty-one percent of non-white survey participants believe credit is their biggest home-buying challenge. The median FICO score is 700, and thus many consumers may be incorrectly assuming that their credit score is too low.
The only way to know for sure is to find out what their credit score is. Plenty of credit card companies provide free credit report monitoring, or consumers can look up their score on one of the three top credit reporting agencies: TransUnion, Experian or Equifax. If consumers’ credit is, in fact, too low for lenders, they can improve their score in a variety of ways.