Buying a home is an exciting time but also a stressful one. If you’re like most buyers, you’ve probably been looking online for home buying advice. You might even have friends, family, coworkers, or acquaintances offering their advice on the process.
While much of the advice you may find well-intended, it is unfortunately not always accurate. Just because somebody bought a home before doesn’t make them an expert. Home buying myths and misconceptions exist and are easily passed on from buyer to buyer. This can be problematic for buyers, especially first-time buyers, who may not know otherwise
To help you know fact from fiction, here are the top 7 home buying myths debunked. Being able to spot these myths and know the truth will help you to better understand your options, what to expect, and overall have a much more successful home buying experience.
Myth #1: Don’t Put Less Than 20% Down
Sure, a 20% downpayment is good to have if you want to avoid paying for private mortgage insurance (PMI). However, if you have great credit, putting less than 20% down on a home can be an acceptable financially sound idea. As long as you are willing to pay for PMI, many lenders will happily offer loans for 5% or 10% down.
If you qualify and want to put down less, consider an FHA loan with 3.5% down. Do note that with less money down, you will face higher interest rates. On the bright side, there will be less to pay upfront and you can start building equity sooner.
Myth #2: Don’t Buy in a Seller’s Market
In real estate, there are buyer’s markets and sellers markets that indicate who has the bigger advantage when it comes to buying or selling a home. In a sellers market, there are buyers in the market than there are homes for sale. This creates higher demand for properties and can lead to bidding wars and offers that are significantly more than the initial asking price. At the end of the day, the seller has the advantage.
As a buyer, you shouldn’t let this hold you back. While you may face higher competition prices, there are other factors to consider. If interest rates are low and there is high-quality inventory on the market, setting out into a sellers market to find your dream home might be well worth the bidding wars and competition you might face. If you decide to buy, make sure you get pre-approved for a mortgage loan so you can stand out against other buyers.
Myth #3: You Have to Have Excellent Credit
Mortgage lenders look at much more than your credit score when determining whether you are eligible for a loan and for how much. These other factors include your income history, your employment history, and your debt-to-asset ratio. This means that if you have a lower credit score but a consistent income and work history, you will likely still qualify for a loan from most mortgage loan providers.
While it is 100% possible to get a loan with a lower credit score, it is always recommended to get your credit score up to at least 580 or higher. This will allow you to potentially receive a higher loan amount and lower interest rates. In other words, work on your credit score, but don’t let it hold you back from applying to loans. You never know what you will qualify for.
Myth #4: You Don’t Need a Home Inspection
In today’s hot market, many buyers are choosing to waive the home inspection in order to compete against other buyers and close on a home sooner. As a buyer, you want to be aware of the many consequences of forgoing the home inspection.
When you skip the home inspection as a buyer, you are basically purchasing the home as is. This includes any problems that may come with it including those that are underlying and not immediately visible. The time and money spent on a home inspection is well worth it. Otherwise you will spend even more time and money in the long run performing costly repairs. Make sure you have your home inspection checklist ready to go!
Myth #5: Looking for a House is the First Step
Buying a home is exciting and buyers. While your first instinct may be to immediately start looking at different neighborhoods and hunting for the perfect home, there are more important steps to the process you will want to complete first.
When it comes to home buying prep, you will first want to ensure that your credit score is in good shape. Be sure you also get pre-approved for a mortgage. There is nothing worse than looking at homes only to be let down when the one you have your heart set on is well out of your budget. Getting pre-approved for a mortgage will help you determine your budget and ensure you are looking for the right homes
Myth #6: Always Choose a 30-Year Fixed Rate Mortgage
The longer you invest in your home doesn't always equal cheaper mortgage payments. It is true that the monthly payments for a 30-year fixed rate mortgage are lower than those for 15 or 7 years. But, have you considered the fact that you could end up paying more during the life of the loan if you pick the 30-year option instead of the shorter term.
How does this happen? With a 30-year mortgage, you are essentially borrowing the same amount of money for twice as long at a higher interest rate. If you would like to pay off your mortgage faster and can afford higher monthly payments, a 15-year fixed-rate loan may be a good idea. You may be paying more upfront, but you have lower interest overtime. Be sure you also weigh out other options such as an adjustable rate mortgage. These loans have fluctuating interest rates, but are ideal if you aren’t set on staying in a home long term.
Myth #7: You Don’t Need a Real Estate Agent
In a world where home search websites exist, it’s easy for buyers to think that they can get the best deal by forgoing an agent and all doing the work themselves. While this is certainly possible, it isn't easy. Buyers agents do much more than just show homes. They also give buyers the lowdown on comparable homes in the market, help buyers steer clear of problematic properties, provide guidance during the negotiation phase, and offer support along the way as needed.
The main reason many buyers choose not to work with a realtor is because they want to save money on buyers agent fees which are usually around 3-4% of the property’s purchase price. Luckily, there are brokerages out there that are more than willing to reduce those commission rates in exchange for the buyer taking on some of the home search responsibilities.
Contact Us at SimpleShowing
Working with our team at SimpleShowing, buyers can purchase any home and receive half their buyers agent’s commission at closing through our Buyer Refund incentive. Through our website, buyers can search for homes, book showings, and connect with an experienced local agent who will provide guidance along the way.
With these home buying myths debunked, you are well on your way finding your home without misconceptions hindering your experience. If you are ready to save an average of $5,000 on your new home, contact us today to start your home buying journey the smart way with SimpleShowing!
In wrapping up our exploration of the top home buying myths, it's clear that understanding the intricacies of the process is paramount. From misconceptions about the required down payment to the role of credit scores, it's evident that navigating the home buying process necessitates a partnership with knowledgeable professionals, such as real estate agents and mortgage loan officers. The truth about FHA loans, provided by the Federal Housing Administration, reveals that a mountain of student loan debt or a less than perfect credit score doesn't necessarily block your path to homeownership.
As we've debunked these myths, remember: while the weight of private mortgage insurance, the ins and outs of conventional loans, and the nuances of mortgage rates may seem daunting, the support of a dedicated mortgage lender and the clarity about closing costs, mortgage insurance, and mortgage loans in general can simplify the journey. Whether you're grappling with student loan debt or seeking clarity on mortgage payment structures, arm yourself with accurate information and trustworthy professionals to make your home ownership dreams a reality.