Buying a home — it’s kind of a big deal. So big of a deal that some believe it’s not in the cards for them, or they quiver in fear over the prospect.
It’s true that buying property is one of life’s biggest commitments, and one that may seem out of reach for plenty of people. But there are also many myths and misconceptions surrounding the process that can hold buyers back from exploring their options ultimately making an investment they might treasure.
Myth No. 1: Now is a bad time to buy
· This myth that seems to persist, ironically no matter what season or year, is that “now is a bad time to buy.”
· When is “now,” generally competition is highest in the spring and lowest in the fall. Other peaks and valleys can be pinpointed BUTonly after the fact, so this shouldn’t factor nearly as much into your decision as your own personal and financial situation.
· A submyth of this one is the notion that mortgage rates are always rising, meaning that if now is a bad time to buy, it will only get worse. But these ideas ignore how real estate works. Rates may rise or fall for a variety of reasons, but not enough to make a sizable difference if you’ve found a home you love.
Myth No. 2: It’s cheaper to rent than it is to buy
· Rent prices have skyrocketed over the last couple of years
· making the cost of renting about the same as mortgage payment would be.
· However there are much higher up-front costs associated with home buying.
·You have the down payment, closing costs and fees, and mortgage insurance.
·But over the course of 4-5 years buying is cheaper than renting. If you plan on staying in the same property for at least 5 years then buying is considerably cheaper than renting is.
Myth No. 3: Your down payment must be 20% & your mortgage is 30yrs
· According to a recent survey, nearly half of renters think they need to put 20% or more down when buying a home. This myth — based on outdated information
· 20% is ideal if you want to avoid that pesky private mortgage insurance otherwise known as PMI.
· many lenders will be glad to offer up home loans with 10% or 5% down—
· Or you can skip the conventional loan and head to the Federal Housing Administration for a government-backed loan with only 3.5% down, if you qualify.
· In fact, there are thousands of options for down payment options
· many programs are geared toward low-income home buyers, you don’t have to be destitute.
· There are lots of different ways you can qualify for help on the local or federal level.
· conventional loan programs offer down payments between 3% and 5%. Veterans, military service members and eligible surviving spouses can get mortgages with a down payment as little as zero.
· You & partner and your financial adviser to determine a comfortable amount rather than the largest amount.
A 30-year mortgage is the best option
· the longer you agree to invest in your home, the cheaper the mortgage payments will be? think again…
· Most people opt for 30-year fixed-rate mortgages and for valid reason:
o Monthly payments are lower than its 15-year counterpart.
· But consider this: You could end up paying way more during the life of the loan 30-year option instead of the 15-year mortgage.
· a 30-year loan, you’re borrowing the same amount of money for twice as long—at a higher interest rate.
· Ask yourself… if I have $1,000, would you rather put that toward my monthly payment or is there a better place ..If you're focused on paying down the house versus the interest, a 15-year option is great."
· No, we're not saying the 30-year option is a bad one. But keep an open mind toward other loan plans,
· including an adjustable – rate mortgage. If you aren't set on staying in your home for the long haul, this could be an ideal mortgage for you.
Myth No. 4: The only up-front cost is a down payment
· We wish. .. For one thing, closing costs, which can be anywhere from 3% to 6% of the purchase price-and those costs can change drastically depending on your state. And don’t forget the slew of fees, taxes, and other costs for inspections, credit reports, insurance, among others.
· The down payment is just one of those upfront costs to consider. home appraisal
· Most lenders will want to see at least 2 months of mortgage payments in reserves in your savings account.
· Closing costs can rolled into the loan up to your situation and the lender.
Myth No. 5: You can't buy with bad credit..Your credit must be perfect to buy a home
· credit scores are liable to hold renters back from homeownership.
· It’s true that your credit report is an important part of the mortgage process that will show your lender you’re a reliable borrower,
· contrary to common belief, lenders don’t require your score to be more than 700.
· Most require a median FICO® Score at least 620 while FHA loans require roughly 580, and for those with lower scores, there are alternative credit sources lenders can look at, including rent and bill records.
· The same goes for student loans: You don’t need to have paid them off completely, but showing that you’re paying them off responsibly will help your case.
· Checking your credit because… some people are concerned it’ll hurt your score… Actually it’s a good idea to get as many loan offers from as many mortgage companies as you possibly can.
· Comparing quotes you can help negotiate a better rate and lower closing costs. FICO, the company that computes the credit scores lenders use allow consumers to “rate shop”. A… consumer can have multiple credit inquiries from lenders for a period of 30 days in order to shop for the best interest rates. Even if 100 mortgage companies pull your credit as long as it’s within a 30 day period, it’ll only count as a single inquiry.
Myth No. 6: You don’t need a home inspection
· tempted to believe this tall tale? especially if your housing market is hot and you're worried your dream home could be sold in a split second to someone else who waives the home inspection.
· beware: Sellers are banking on your skipping this crucial step. It means you'll get the home as is, including any and all problems that come with it. And sometimes those problems aren’t exactly visible.
· spend the money for a really thorough inspection, because in the long run it can save you a lot of money and time.
Myth No. 7: The asking price is set in stone
· Much like buying a car, the offer you make on a house does not need to be the asking price.
· If you have stellar credit, pre-approval, and a down payment ready to go, sellers might be more willing to negotiate than to wait for another, possibly less awesome, buyer to come around.
· Plus, if your home inspection (you know—the one you got because you're smart) turns up issues, you can use those to your advantage in your negotiations.
Myth No. 8: You can save money by not using a real estate agent
· You might think you can do this home-buying thing solo. After all, isn't that what the internet is for?
· In the age of online real estate listings, it can be tempting to think you can find a home on your own and save money doing it.
· But online listings don’t cover everything an agent will help you with.
· Moreover, real estate agents are paid on commission, rendering their guidance free to you.
· A good real estate agent can help you stay in your budget, find options that fit your needs that aren’t online, assist you in making the right offer and much more.
· The reality is that not having a Realtor is a receipt for stress, and wasting time and money.
· We're the pros—everything from negotiating to searching power (yes, they have tools to see stuff you can't).
9. It’s cheaper to buy a fixer-upper.
· Sure, if you’re the imaginative type, you may look at a low-priced home in poor condition and envision great potential.
· But how much will that potential cost?
· Are you really equipped to make every upgrade and renovation without paying as much as you would for an up-to-code home?
· Buying a fixer-upper can make financial sense if the deal is right or you’re going to be doing the work yourself,
· the cost of renovation will outweigh the savings. It also takes a great deal of time, transactions, permits and likely headaches to get a property from drab to fab. Is that really how you want to spend the first few years in your new home?
· Buying a home that needs a lot of renovating will be cheaper Everyone has seen the HDTV shows where people buy an ugly home for really cheap and invest some money into and make it into their dream home.
· While this is great, in principal. It rarely every happens in reality. Tearing down walls and completely redoing kitchens are much more difficult and expensive than they appear on TV.
· Many people may plan on doing these upgrades but knowing the time and money investment it takes will never get around to renovating that old home. Then what happens? You’re stuck in a home you don’t like and are ready to buy a new one. Make sure you like the house how it is. If it needs new carpet or paint, that’s easy. If you need to tear down walls to make it look nice then it’s best to move on.
Myth No. 10: Schools / Neighborhood doesn't matter if you don't have kids
· We get it: You love the house, it's in your price range, and you want to move fast. But there's more to it than that.
· The neighborhood you choose matters—both now and later when you might consider selling. Even if you don’t have children, good schools are a sign of a good neighborhood. Also, check out the area's walkability, your commute to work, and any other features that would make the hood a good fit for your lifestyle—now and a decade from now.
Last but not least, the whole point of buying a house is to get everything you want in the home of your dreams. Right? ….Not really. You might not be able to afford every bell and whistle you imagined but you can prioritize what is most important and find something wonderful that fits all of your needs and many of your wants. In the end, the dream isn’t a fairy-tale castle. It’s your real home — not the perfect home, but the perfect home for you