Millions of renters across America plan to buy a home in the next five years.

While many cite credit limitations and lack of a down payment as reasons for not pursuing a mortgage, many of these families could unknowingly qualify for a mortgage today.

New study shows most do not know minimum qualifications for a mortgage.

A new study by Fannie Mae’s Economic & Strategic Research Group found there is a “significant lack of understanding about minimum mortgage qualification criteria not only among consumers in general, but more importantly, among renters who plan to purchase a home within the next five years.”

Forty percent of all surveyed said they did not know the minimum down payment required by Fannie Mae, and that number was 30 percent among renters planning to buy a home in the next five years.

Among the more than 3,000 surveyed, 54 percent did not know the minimum credit score required, and that number was 45 percent among renters.

When asked to guess the minimum down payment, the mean response of all surveyed was 12 percent, when Fannie Mae’s requirement is 3 percent.

The same was true for those asked about credit score requirements. The mean answer was 652, while Fannie Mae requires a minimum of 620.

For Realtors like Colleen Black, associate broker at Keller Williams Realty Metro South, these misconceptions among consumers are a common occurrence.

“From time to time, we receive inquiries on our listings from people asking if the seller would consider renting,” Black said. “We usually ask the caller why they’re choosing to rent, instead of buying. An answer we hear frequently involves whether the caller can qualify for a loan. Sometimes, the caller is sure about their financial situation. But, many times, we hear uncertainty.”

Black said she typically recommends that renters speak to a lender, even if they are bent on renting.

“This is part of vital guidance nearly all first-time buyers need, and that includes a large percentage of renters,” Black said. “We point out that the caller has nothing to lose by contacting a lender and that at the very least they’ll be getting important information that can help them either now or at some point in the future when they might possibly wind up being approved for a loan.”

Black said potential home buyers who can’t qualify for a mortgage now would be best suited to go ahead and speak to a lender.

The lender can give short-term guidance on what the buyer will need to do to shore up finances and credit capabilities.

“As Fannie Mae’s study shows, most people do not know what the specific requirements are, but pretty much know if they will not be able to qualify for a loan,” Black said. “In terms of one day being able to be a homeowner, this doesn’t necessarily help them. Consumers need a better understanding of what they can do in the short term that will pay off by letting them sit at a closing table later. Having said that, the study reveals a large need that we as Realtors can certainly help with.”

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