Another Great Article From: Keeping Current MattersFannie Mae recently released their “What do consumers know about the Mortgage Qualification Criteria?” Study. The study revealed that Americans are misinformed about what is required to qualify for a mortgage when purchasing a home. Here are three takeaways:
- 59% of Americans either don’t know (54%) or are misinformed (5%) about what FICO score is necessary
- 86% of Americans either don’t know (59%) or are misinformed (25%) about what an appropriate Back End Debt-to-Income (DTI) ratios is
- 76% of Americans either don’t know (40%) or are misinformed (36%) about the minimum down payment required
To help correct these misunderstandings, let’s take a look at the latest Ellie Mae Origination Insight Report, which focuses on recently closed (approved) loans.
BACK END DTI
Whether buying your first home or moving up to your dream home, knowing your options will definitely make the mortgage process easier. Your dream home may already be within your reach.
Millennials: What FICO Score is Needed to Buy a Home?
In a recent article by the Wharton School of Business at the University of Pennsylvania, it was revealed that some Millennials are not looking to purchase a home simply because they don’t believe they can qualify for a mortgage.
The article quoted Jessica Lautz, the National Association of Realtors’ Managing Director of Survey Research, as saying that there is a significant population that does not think they will be approved for a mortgage and doesn’t even try. The article also quoted Fannie Mae CEO Tim Mayopoulos :
“I do think that there’s a sense out there in the marketplace among borrowers that credit may not be available, especially for people with lower credit scores.”
So what credit score is necessary?
A recent survey reported that two-thirds of the respondents believe they need a very good credit score to buy a home, with 45 percent thinking a “good credit score” is over 780.
In actuality, the FICO score on closed loans (as reported by Ellie Mae) is much lower and has been dropping over the last several months.
Millennials who are considering a home purchase should get advice from a local real estate or mortgage professional now. They may be surprised how much the requirements for a mortgage have eased.
Credit Scores range from 300 to 850. A credit score of 760 or more is considered an excellent credit score.
Although you may be able to get a home loan with a credit score of less that 760, to get the best interest rate on your loan, you will need a credit score of 760 or more.
Here are 5 Quick Ways to Boost Your Credit Score
1. Get a copy of your credit report and dispute any errors you find.
2. Negotiate with a creditor that is reporting negative information about you. Write a letter and find out what you can do to erase that negative information.
3. Don’t max out your credit cards. If you have, start paying those balances down. You should not have used more than 30% of your available credit at anytime and using only 10% is best. This applies even if you are paying the balance of monthly. 30% of your credit score rating is based on debt owed. Continue reading