Skin in the Game

When it comes to a mortgage, Orion’s brokers tell our AEs that there’s a big gap between what their clients think they need in order to get one and the reality of what buyers are successfully doing. In the mortgage market, reality is very often different from perception. Or, for that matter, myth. 

Recently the National Association of Realtors issued its 2017 Aspiring Home Buyers Profile report. The report summarized that 39% of non-owners believe they need more than 20% for a down payment on a home, 26% believe they need to put down 15% to 20%, and 22% believe a down payment of 10% to 14% would work. 

Orion’s brokers will be interested to learn that when we dig into what actually happened in 2016 we find that most young people buy homes with … less than 5% down. That’s less than one-third of what the average renter had assumed. 

As with many things in life, the most correct answer to the question, “How much you need to put down?” is “it depends.” Our brokers know that it is possible to buy a home with a mortgage with no money down. VA and USDA loans offer the ability to put no money down. Also, there are 3% down payment programs backed by Fannie Mae and Freddie Mac, as well as the traditional 3.5% FHA mortgage that is primarily targeted to first-time buyers. 

How are they doing it? Major mortgage products (conforming, FHA, VA, and USDA) represent almost 99% of the mortgages to people under 35 in 2016. And it doesn’t require perfect credit, just fair credit.  

These numbers potentially us that for the millennial dreaming of buying a home this year, the borrower needs a FICO score of at least 639 and enough money that they could put down at most 5%. If our broker’s clients live in a typical American town, what they need could be as little as $3,500. And to our experienced brokers that sounds a lot more attainable than most people think.

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