Many prospective home buyers are hesitant because of two myths: that you have to have 20% down payment and that you need a perfect credit score.
The Truth about Down Payments - There are many alternatives to a large down payment. FHA, Department of Agriculture, VA, and other government programs offer you the ability to put down much less on your house. In some cases, you can buy a home with just 3% down.
Most prospective homebuyers worry that they won’t be able to save for the down payment. In fact, many spend years saving up or giving up, when they could be earning equity. Most Americans aren’t familiar with alternative down payment plans.
Your average bank may not be terribly helpful on this count. The bank is the place that will look for the maximum down payment, simply because they want as little risk as possible. Alternative lenders can help you find the right down payment option.
FICO Scores - Your FICO credit score is a number that many people live and die by. They invest an amazing amount of time worrying about getting well into the 700’s. That’s a great goal, but not a requirement.
In fact, the majority of mortgages are awarded to people who have credit scores below 750. If your score is 650 or higher, it’s worth trying anyway. It’s worth noting that 8.7% of mortgages are awarded to people who have credit scores between 600 and 649.
Asking about lower down payments and low credit score mortgages might open the door to homeownership more quickly. There are many options in the world and it’s okay to hear no, even if it’s just to learn something new about your chances of getting a loan. At least you know where you stand and what needs to be done.