What credit score do you need to qualify for a mortgage? What down payment do you need to make? What does your debt-to-income ratio need to be?

If you are an average homebuyer, there is a good chance that your answers to those questions will be incorrect. In fact, you may overestimate how difficult it is to qualify for a competitive home loan.

Fannie Mae recently published some interesting data from a 2018 study on 3,000 respondents. This was a follow-up to a study conducted in 2015. According to their research, “Although the usage of online sources of mortgage information is becoming more common among consumers, they still overestimate the minimum credit score and down payment necessary to qualify for a mortgage and remain unfamiliar with low down payment programs.”

The misconceptions were found across the board among respondents. Even those who demonstrated financial literacy and those who had already purchased homes in the past believed that qualification criteria were more rigorous than they are.

These misconceptions can have consequences not only for consumers now, but for those same would-be homebuyers in the future. Fannie Mae states, “For some Americans who would like to own a home, they could qualify for a mortgage but may assume homeownership is not a possibility. As a result, they may avoid further research or preparations, such as saving for a down payment or improving their credit.”

How To Qualify for a Mortgage in Indiana?

These financial decisions can further delay would-be homebuyers in pursuing their goals. In fact, is it likely that many people who are still renting today have been putting off buying a home for years which they may actually be able to afford if they would just make small changes to their financial situations.

If you are thinking about purchasing a home, but you are worried that you do not meet the qualification requirements for a competitive home loan, here are some facts which are helpful to know:

• Many types of loans have flexible credit requirements. If your credit score is not perfect, you might consider the FHA loan program insured by the Federal Housing Administration (FHA). Even with a credit score as low as 500, it is possible to buy a home with this type of mortgage.

• You should shoot for a debt-to-income (DTI) ratio of around 43-45%. But depending on the lender and program, a higher DTI may be acceptable.

• There are multiple types of mortgages with low down payment requirements. Down payments for FHA mortgages can be as low as 3.5%. Conventional loans can have down payments as low as 3%. With a USDA or VA mortgage, you may be able to buy a home with zero down. Many of these types of loans also have lower closing costs.

• Finally, if you are a first-time homebuyer, there may be other programs at the national, state and local levels which can help you to afford your down payment. Some of these programs, such as the National Homebuyers Fund (NHF) Sapphire Program, are also available repeat homebuyers.

Ready to Move into an Indiana Home Affordably Today?

Buying a home may be more affordable and achievable than you might think. Even if you do not have an ideal credit score or DTI ratio, you may be able to purchase a home. This may be true even if you cannot afford a large down payment. To find out if you are eligible for a competitive mortgage in Indianapolis or elsewhere in the state today, please call (317) 255-0062 to schedule your consultation.