Houston Home-Buying Facts: Down Payments & Credit

If you’d like to buy a home, but don’t think you can because you don’t have enough saved for a down payment, or because you have poor credit, we have good news! You don’t need 20 percent down, and you can still buy with bad credit. Your Keller Williams Memorial real estate team is here to explain.

The Aspiring Home Buyers Profile found that 30 percent of non-homeowners believe that they need 20 percent or more for a down payment on a home purchase, just to qualify. That isn’t true at all! The majority of first-time buyers don’t put 20 percent down. You can score a loan with as little as 3 percent down, or up to 10 percent down, if you have stable income and good credit.

Speaking of credit, an Ipson survey found that 62 percent of respondents think they need excellent credit to buy a home, with 43 percent thinking a good credit score is over 780. In truth, the average conventional loan in August had a credit score of 752, and the average for a FHA loan was 683.

If your credit score still isn’t up to par with these numbers, there are a few steps you could take:

1. Check for credit report errors. Creditors make mistakes more often than you realize. See if any errors come up that aren’t yours. If you had a one-time mistake, such as one late payment, call the organization and ask for it to be removed from your credit. You may be surprised how often they’ll do this!

2. Get a low credit score home loan. For a FHA loan, you need a minimum credit score of 580 and you can put down as little as 3 percent. However, you’ll have to pay for mortgage insurance, so that’ll up your homeowner costs. You might also end up with a higher interest rate, meaning you’ll pay more over the life of the loan than with a mortgage with a lower interest rate.

3. Increase your down payment. Let’s say your credit history isn’t the best, but you’ve saved up a lot of cash, or you’ve recently gotten a new job with a high salary. The more you put down, the less risk you are to the lender. Increase your down payment to 25 or 30 percent and you’ll strengthen your chances of qualifying for a loan. If you have loads of money saved, you could also just pay cash!

If you have questions about the home-buying process in the Houston real estate market, or you’d like to start searching for the home of your dreams, contact us! The Keller Williams Memorial real estate team is here and ready to help you achieve all of your home-buying goals this fall season.