Buying a home can be an exciting time, but it’s not always a simple process — especially if you haven’t navigated the home buying waters before. You will be given countless advice and recommendations on when and why you should buy a home, but how do you really know if you’re receiving good information? It can be easy to believe some of the common myths and misconceptions associated with buying a home … but, today we’re busting those myths!
Here are some of the most common home buying myths we’ve heard recently:
Many home buyers still believe you need a 20% down payment before you can get approved for a mortgage to buy a house. This simply is not the case anymore.
FHA loans, for example, offer borrowers 3.5% down payments with a credit score of 580 or higher and 10% with a score lower than 580. Similarly, VA loans — offered to veterans and service members — often require no down payment at all.
While it is true that home sellers are responsible for paying commissions (typically ~6% of the closing price, split between the buying and selling agent), it’s a common misconception that this doesn’t impact a home buyer.
In most transactions, the home seller and their agent commonly compensate for this cost by adding it into the listing price of the home. The average buyer could see a 2-3% price increase. On a $1million home, that can be close to $30,000!
This home buying myth can cost you! Just because you’re approved for a $700,000 mortgage doesn’t mean you need to buy a house for $700,000. While lenders look at your debt-to-income ratio (they typically want to see no higher than 36%), you have to factor in expenses that might not be included in that number — like child care, entertainment, your savings, etc.
Years ago, this was a true statement. However, today’s home buyers have a wealth of options available to them — even with less than stellar credit. While having poor credit can certainly increase your interest rate and down payment requirements, there are avenues you can take to buy a home. FHA loans, for example, require you have a credit score of 500 or higher.
If you’re financing a home, a home inspection is most likely required by your lender. What’s more, a home inspection is crucial for your understanding of what you’re buying. This includes new homes.
Don’t skip the home inspection! It helps home buyers uncover any items that may cause issues in the future — and you can get those repaired before you close or can renegotiate the selling price to account for needed repairs.
What are the benefits of buying vs. renting? It’s not a myth that rent prices have skyrocketed over the past few years — making some rent payments on par with mortgage payments. While there can be higher up-front costs that come with buying a home (down payments, closing costs, mortgage insurance, inspections, etc.), if you plan on being in a home for 4-5 years, buying can be considerably cheaper than renting.