Veterans United: Misconceptions May Stymie Homebuying

Veterans United, Columbia, Mo., released a new survey, finding that misconceptions about credit scores, down payments and mortgage rates are widespread and may be barriers to homebuying and ownership.

The survey–querying buyers planning to purchase within the next three years–found that 57% believe you need at least a 660 credit score to qualify for a mortgage. Thirty-four percent believe you need a score of 700 or higher to qualify.

Two-thirds say that you need near-perfect credit to secure the best interest rates.

Nearly half, at 46%, believe a conventional loan requires more than a 5% down payment. And, 15% believe a 20% down payment is required.

Awareness of options for low or no downpayments–such as FHA, VA and USDA loans–is limited, with 31% of respondents saying you can’t buy a home without a down payment.

Respondents don’t have a good understanding of how mortgage rates are set, with 61% saying the government dictates what rates lenders can offer. Two-thirds believe the Federal Reserve directly sets mortgage rates.

“Mortgage rates aren’t one-size-fits-all–they can vary significantly based on the lender, the loan program and the borrower’s overall profile,” Chris Birk, vice president of Mortgage Insight at Veterans United, said. “That’s why it pays to shop around and compare rates, costs and fees among multiple lenders. And while the Federal Reserve plays an important role in the broader economy, markets are typically pricing in expected Fed moves well before any official decision is announced.”

About 63% of respondents said they believe rates are “at the highest point ever.” Veterans United noted that at the time of the survey, averages rates were around 6%. The all-time was set in 1981, at 18.6%, per Freddie Mac data.

Despite these misconceptions, 56% of respondents say they are very or extremely knowledgeable about homebuying, and 87% say that owning a home is one of their most important goals in life.