96% Of Americans Make Homeownership Harder Than Necessary – Do You?

Buying a home has long been a key part of the American dream. Not only does homeownership provide financial benefits, but it can also offer the emotional benefit of having a place to call your own. Since 1960, homeownership rates have stayed above 60% and varied little.¹ Even today, homeownership rates are between 62% – 70%, on par with rates from the ‘60s.²

Still, aspiring homeowners face several hurdles. About 1 in 5 Americans (23%) cited current market conditions as a preventative factor to homeownership. However, down payment and closing costs, as well as credit history and score, are about as likely to keep people from purchasing a home as current market conditions, with 22% and 20% of respondents citing these issues, respectively. 

Market conditions may be challenging, but it turns out that other major preventative factors to homeownership aren’t as limiting as most think. 

We surveyed 3,177 Americans and found: 

• About two-thirds of Americans believe you need a higher credit score than what is actually necessary.
• Down payment costs are 3 – 6 times more affordable than most Americans think.
• Nearly half of Americans believe myths about mortgage qualification that may add unnecessary hurdles to homeownership. 

So, if you’re an aspiring homeowner, here’s the good news: Getting a mortgage probably isn’t as hard as you think!  

47% Of Americans Believe You Need A Good Or Great Credit Score When You Only Need Fair

What credit score do you need to qualify for a traditional mortgage? Nearly half of Americans believe you need a good or great score of 670 or above, but the truth is you only need a fair score of 620.

• Men generally have a slightly more accurate guess than women of what credit score is needed to qualify.
  • Men guessed a median fair score of 650.
  • Women guessed a median good score of 670.

• Current renters or those looking for a home generally have a slightly more accurate view than current or past homeowners of what credit score is needed to qualify.
  • Current or past homeowners guessed a median good score of 670.
  • Current renters or those looking for a home guessed a median fair score of 650.

• Both those with above-average and below-average incomes generally believe you need a fair score, guessing a median score of 650.

• A small percentage of Americans (3%), appear entirely unsure about what credit score is needed to qualify for a traditional mortgage, guessing a credit score over 850, which doesn’t exist.

Not only do nearly half of Americans incorrectly believe you need a good or great credit score, but nearly two-thirds believe you need a higher score than necessary. Just over 66% of respondents guessed a score between 621 – 850. 

This false belief may also unnecessarily prevent prospective buyers from becoming homeowners. About 1 out of 5 survey respondents marked credit history or credit score as a determining factor in why they aren’t purchasing a new home. But since necessary credit scores are actually lower than what 66% of Americans believe, homeownership could actually be easier than they think.  

Down Payments Are Significantly Less Expensive Than Most Americans Believe

Down payments are another factor preventing Americans from purchasing a new home. Combined with closing costs, down payments are a preventative factor for homeownership cited by over one-fifth of Americans.

But down payments are significantly less expensive than most Americans believe. About two-thirds of respondents (61%) believe you need between a 10% – 20% down payment when you actually only need 3% on a conventional mortgage. This means down payment costs are between 3 – 6 times more affordable than most Americans believe.

The 20% down payment myth comes from mortgage insurance requirements. While you only need a 3% down payment to qualify on a conventional loan, 20% is needed to avoid paying private mortgage insurance (PMI). While there’s confusion over what down payment is necessary to qualify for a conventional loan, about half of Americans (45%) were aware of down payment requirements to avoid PMI. 

• Even current or past homeowners have confusion about what down payment is necessary, with only 12% accurately guessing the minimum 3%. Over 8 out of 10 current or past homeowners believe you need a down payment that’s higher than necessary.

• Overall, slightly more homeowners (82%) overestimate down payment costs than non-homeowners (76%).

• About the same number of men and women (12% and 13%, respectively) have an accurate guess of what down payment is actually necessary.

• Men (83%) are about as likely as women (80%) to overestimate down payment costs.

Overall, only about 1 in 10 Americans have an accurate estimate of what down payment costs are needed for a conventional mortgage, and down payment costs are significantly less expensive than 81% believe.

Only 3% Of Americans Have An Accurate View Of What Factors Affect Mortgage Qualification

Do you know what factors affect your ability to qualify for a traditional mortgage? If not, you’re not alone. We asked survey respondents to identify these factors in our recent survey, and only 3