Buying a home often goes hand in hand with anxiety, stress, and unpredictability. Whether this is your first time or you've dabbled in the real estate market already, chances are you still might feel insecure about the process. Unfortunately, there are many common home buying misconceptions out there that might add to the stress. But, buying a house doesn't always have to be a nerve-racking experience. I've made a list of the most common home buying myths you should be aware of. Explore these popular wrong impressions and simplify your home buying process in 2021.
Most common home buying misconceptions
Here are the most common misinterpretations when it comes to starting the process of buying a home.
It's cheaper to rent than buy.
I need to put down a lot of money to buy a home.
Now is the wrong time to buy a property.
Having an impressive credit score is essential if you want to own a home.
I need to have my student loans paid off to start the process.
I should always choose the mortgage lender with the lowest rate.
The down payment is the only money I need to have upfront.
I will probably pay the exact price listed or lower if I negotiate.
I should find my dream house before applying for a loan.
The mortgage bill will be the only expense I will end up having.
It's cheaper to rent than to own
This depends on where you live. There certainly are cities with enormously high home prices, but your mortgage, insurance, and taxes might be less than what you pay in rent in most places. Additionally, if you pay the mortgage, you invest money in something of your own and, therefore, add value to your home.
Down payment is 20%
There are several options for homebuyers to put very little or no money down. For example, with a conventional loan you can put 3% down (if you qualify for the program), and the Federal Housing Administration mortgage allows the buyer to put 3.5% down. If you qualify for a VA loan you can put 0% down, and if you're looking at purchasing in a USDA area you can put 0% down as well. All of these loan types allow you to put down much less than the 20% most people think they need. To help you determine the best option you can afford, you should speak with a professional mortgage consultant, and I can refer you to some great ones!
Now is the wrong time to buy a house
Mortgage rates are currently at their lowest. To give you a more accurate idea of what we are talking about, you should know that the average interest rate on a 30-year mortgage was 4.54% in 2018, 3.94% in 2019, and 3.11% in 2020. Of course, deciding whether to buy depends on your life situation and plans. If you want to settle down into a comfortable home, taking advantage of low-interest rates is a great option.
However, if you are planning a significant life change and a long-distance move in the near future, it may not be the right time to buy a house. The best scenario for buying a property is that you stay there for five years or longer. (If you are moving out of the area, be sure to prepare in advance. Hiring a reputable moving company to help you transfer anywhere in Florida will ease the burden of moving.)
You need the perfect credit score
It's a fact that credit scores impact whether a buyer can buy a home or not. However, one of the common home buying misconceptions is that you need to have the perfect credit score to buy a house. The ideal credit score for low-interest rates is 700. However, it's essential to do your research and keep in mind some loans will accept your credit score being 580 or higher as long as you meet other qualfications.
You can't get a mortgage if you have student loans
Mortgage lenders are interested in your DTI (debt-to-income) ratio, but not having your student loans paid off doesn't disqualify you from the game. Of course, the less debt you have, the better. But still, not paying off your loans won't ruin your chances of buying a house.
You should choose the loan with the lowest interest rates
Interest rates are a significant factor you need to consider when buying a home but bear in mind that the cheapest deal isn't always the best deal. Rates and fees vary based on who you choose as your lender, and it's not worth going with the lowest rate if you risk not closing on time, or if there may be a bait-and-switch tactic used down the line to increase the rate you ultimately end up paying.
Your mortgage will be the only expense you will have
Apart from the essential mortgage bill, don't forget to consider other costs related to your new house. Utilities, property taxes (which will usually increase after your first year of ownership), homeowner's association (HOA) fees, and homeowner's insurance are also monthly costs you need to account for. Moreover, they should play a significant role in deciding whether and where you should buy a property.
You will pay the listing price or even lower if you negotiate
Keep in mind that nowadays markets are highly competitive. Therefore you shouldn't set your heart on a house that is above your price range. In fact, in this market, sometimes you will need to offer more than the listed price because of the competition.
The only money you will need upfront is the down payment
Paying the down payment is only the beginning. There are also closing costs which can range anywhere from 2 to 5% of your home's price. Other expenses you should think of in advance are repairs, improvements, and furnishing you want to do in your new home. Lastly, you should have emergency cash on the side, which can help you cover at least three months of necessary expenses.
First, find the house, then apply for the loan
Checking out many houses while looking for the one is exciting, but you only want to start seriously looking once you've been approved for a mortgage. Imagine the scenario of being serious about getting a house and finally finding the one that suits you and your family, but having to wait to get approved for a mortgage and risking your chances of getting it because you couldn't get that done in time.
Final words
Believing in these common home buying misconceptions can be harmful to the whole process you are about to start. This might lead to you decide against pursuing a home. Therefore, knowing all your options and being informed of these myths is the key to having a positive experience when choosing to upsize. If you have any questions at all, I am always happy to answer them during a customized consultation, so please reach out to me today.