The Truth About Home Mortgage Rates and Downpayments
This article authored by: Catherine Hallberg
There has been a lot of coverage in the news lately on interest rates, factors that cause an increase or decrease and how movement will affect the overall housing market. A more important topic that has gone unnoticed is the fact that mortgage credit policies have eased up a bit in the last few years, making it much easier to purchase a home.
There continues to be a myth that a person needs to have 20% of the purchase price saved as a down payment in order to purchase a home. This is just not true and in fact, has not been the case for a very long time. You can purchase a home for as little as 3% down on a conventional loan, or 3.5% down on an FHA loan. And if you are a Veteran, the Department of Veterans Affairs provides a loan for 0% down! In the last six years, the percentage of buyers that paid less than 5% for their down payment has increased from 2% to 17%. These loans are available and ready to be utilized by all types of buyers.
The FHA or Federal Housing Authority loan is available to all borrowers and to those that may have some credit challenges in their credit history. While credit policies did tighten about ten years ago, this past year we have seen these credit policies come back to a more level playing field for most borrowers. The average credit score necessary to purchase a home in the last six months has decreased from 731 in September 2016 to 720 in February 2017.