Misconceptions about what it takes to qualify for a mortgage loan are keeping renters out of the housing market, according to the annual Borrower Insights Survey released by Ellie Mae.
"Surprisingly, almost half of the renters surveyed said that they thought they needed to put down a larger down payment than necessary to be able to purchase a home," said Joe Tyrrell, executive vice president of corporate strategy at Ellie Mae. "With the range of loan products available today, including FHA loans, this simply is not the case."
Ellie Mae found that more than a third of all renters (36%) continue to rent because they do not have enough money saved for a down payment. The percentage is even larger among millennials, 52% of whom said that the lack of a down payment is the biggest factor preventing them from buying a home.
According to Ellie Mae, the survey results identified an opportunity to educate renters about what it takes to qualify for a mortgage loan. Although it is true that some renters may not have saved enough to qualify, the survey found that almost half, at 49%, believe they would need a down payment of 20% or more. Additionally, 34% of renters believe they need a credit score in the 700 to 749 range to qualify, while another one in three renters think they need a credit score in the 750 to 799 range.