Buying your first home is often a dream for many tenants. But with all of the information on how to buy a home, it can be easy to believe some of the myths about buying a home. Whether you want to buy one House in Seattle, WA, or a Apartment in Miami, FLYou’ve probably heard some of the myths about how much you need to pay for a down payment or how high your credit score should be.
Before targeting your dream home, make sure you know exactly what makes the myths of buying a home different from the facts. You may find that you can buy your first home sooner than you think.
MYTH 1: You need a 20% deposit
The biggest home buying myth for any first time home buyer is that you need a 20% down payment to buy a home. In many cases your deposit can only be 3.5%. Common types of low to no down payment loans are FHA, VA, and USDA loans. With FHA loans – Loans for Low to Middle Income and Credit Score – your down payment can be as low as 3.5%. For veterans and current service members, VA loans do not offer down payment mortgages, and those looking to buy a home in a rural area can qualify for a USDA no down payment loan.
Apart from loans, Down payment support programs can help you lower the cost of your deposit. These programs are available nationwide, nationwide, or locally in your county or even in your city. Down payment utilities offer a wide variety of types of support such as second mortgages, forgivable loans, or grants that cover part to full cost of your down payment. Your real estate agent or mortgage lender can help you determine which down payment assistance you will qualify for.
Given the option of buying a home with a 20% down payment, there are a few advantages to consider. For starters, you don’t need to include private mortgage insurance (PMI) in your budget. PMI are additional costs that your mortgage lender may charge if your down payment is less than 20% and the cost is included in your monthly mortgage payment. However, it’s always a good idea to speak to your financial advisor or money manager to determine your finances and whether a 20% down payment is the right option.
MYTH 2: Renting is cheaper than buying a house
One of the most common myths about home buying is that renting it is cheaper than buying a home. If you choose to transition from tenant to buyer, you may think that renting is the more cost-effective option. However, in some cities, the cost of renting a home can be less than or equal to a monthly mortgage payment.
If you are serious about buying a home, buying a home instead of continuing to rent can save you money in the long run. To compare the cost of renting with buying a house, you can use a Rent against purchase calculator to determine which option is best for your circumstances.
MYTH 3: Your credit score must be perfect
Home buying myths revolving around credit scores are common, particularly the myth that you must have a good credit score to buy a home. Fortunately, that’s not always the case. If your credit score is at least 580, you can qualify for an FHA loan with a 3.5% down payment. For those looking at USDA loans, your credit score should also be a minimum of 580. VA loans do not actually have a minimum credit score but instead require lenders to look at a homebuyer ‘s entire credit profile.
In general, if your credit score is higher, you probably have more opportunities to qualify for a conventional loan. If you have a higher credit rating, you may also find that the terms of your loan or the interest rates are up better. Just because your credit isn’t good doesn’t mean your home ownership dreams have to come to a halt.
MYTH 4: All mortgage lenders offer the same interest rate
First time home buyers can have the belief that every mortgage lender will offer you the same interest rate no matter where you go. When buying a mortgage, it is always a good idea to get more than one quote. Not every mortgage lender offers you the same – or even the best – loan terms. To avoid this mistake, it is important to get quotes from multiple mortgage lenders and find the one that is best for your finances and home ownership goals.
MYTH 5: Home inspections are optional
Especially when there are bidding wars, it can be tempting to skip a Home inspection to highlight your offer. However, such home buying myths can lead to more problems later on. In most cases, mortgage lenders require a home inspection before buying the home, so you may not even have the opportunity to pass a home inspection.
If your lender doesn’t require an inspection, that doesn’t mean you should skip it. It is important to know the condition of the home that you are planning to buy. This way you will be informed of any damage or problems in the house before you become the owner. If a home inspection reveals significant damage, you may be able to negotiate with the seller to fix the issues or bring the price down.
MYTH 6: The list price is non-negotiable
A home buying myth that some first time buyers believe list price is set in stone. Depending on the real estate market, you may need to be willing to spend more than the listing price of the home or bargain for a lower price. If you are Buy from a seller’s market– If there are more buyers than houses available – you should be prepared to bid above the list price.
If it’s a buyer’s market with more homes available than buyers ready to buy, you may be able to bargain for a lower price than what is advertised. In either case, believing in the home buying myths via listing prices can lead you to lose the home of your dreams or even overcharge.