Buying a home is one of the most significant financial decisions you’ll ever make, yet it’s surrounded by mortgage myths that can mislead potential buyers. At A and N, we believe in empowering you with accurate information. Let’s debunk some common homebuying myths vs facts!
Myth 1: You Need a 20% Down Payment
Reality: While a 20% down payment can help you avoid private mortgage insurance (PMI) and secure better loan terms, it’s not a strict requirement. Various loan programs, like FHA loans, allow down payments as low as 3.5%. VA loans even offer zero down payment options for eligible veterans and service members. Explore your options and choose what works best for your financial situation.
Additional Read: Creative Ways to Secure a Down Payment
Myth 2: Renting is Cheaper Than Buying
Reality: Renting might seem cheaper in the short term, but buying a home is often more cost-effective in the long run. Homeownership allows you to build equity, benefit from tax deductions, and stabilize your monthly housing costs. Plus, as a homeowner, you have the freedom to personalize your space without landlord restrictions.
Additional Read: Why Pay Rent When You Can Purchase a Home?
Myth 3: You Need Perfect Credit to Buy a Home
Reality: While a higher credit score can secure better loan terms, you don’t need perfect credit to buy a home. Many loan programs cater to buyers with less-than-perfect credit. FHA loans, for example, are designed for borrowers with lower credit scores. Start by checking your credit report and working on improving your score, but don’t let less-than-perfect credit deter you from pursuing homeownership.
Myth 4: The Lowest Interest Rate is Always the Best Option
Reality: While a low-interest rate is important, it’s not the only factor to consider. Low rates can sometimes come with higher closing costs or less favorable loan terms. It’s crucial to look at the overall loan package, including fees, terms, and conditions. Consulting with a mortgage professional can help you find the best deal for your specific needs.
Myth 5: You Should Always Choose a 30-Year Fixed Mortgage
Reality: A 30-year fixed mortgage is popular due to its stable monthly payments, but it’s not the only option. Depending on your financial goals and circumstances, an adjustable-rate mortgage (ARM) or a 15-year fixed mortgage might be more advantageous. An ARM offers lower initial rates, which can be beneficial if you plan to move or refinance within a few years. A 15-year fixed mortgage allows you to pay off your home faster and save on interest, albeit with higher monthly payments.
Additional Read: 15 vs. 30-Year Mortgage Calculator
Myth 6: It’s Cheaper to Buy a Fixer-Upper
Reality: Buying a fixer-upper can be a great way to get more house for your money, but renovation costs can quickly add up. Unexpected issues and delays are common, potentially making the total cost higher than buying a move-in-ready home. Always budget for more than you think you’ll need and consider whether you have the time, skills, and resources to manage a renovation project.
Myth 7: It’s a Bad Market for Buying
Reality: Buying a house is kind of like the decision to have kids; if you wait for the perfect time, it will never happen. The factors surrounding the house and your situation are what determine whether it’s a bad time to buy or not.
Myth 8: Zillow Home Value Estimates Are Accurate
Reality: The reality is that while you can get a reasonable estimate based on the neighborhood and other data regarding the home, it isn’t as accurate as a valuation.
Myth 9: There Are No New Homes Being Built
Reality: If you can’t find a new home being constructed in your area, talk to a realtor about the areas where builders are focused on new construction.
Myth 10: My Debt Ratio Is Based on the Amount of Money I Bring Home
Reality: Actually, it is based on your gross income before deductions. Make sure the mortgage payment you get is one that really fits into your overall budget.
Myth 11: Unsettled Debts Will Keep Me from Being Approved
Reality: The fact is that – most of the time, unless the debt is excessive – you can probably get away with a few old collections as long as you have a decent credit score. Underwriters don’t usually worry about medical debts that have gone unpaid since most people will do what is necessary to get well.
Additional Read: How Debt Affects Your Mortgage Application
Myth 12: Paying Off a Previous Mortgage Early Will Improve Your Chances of Approval
Reality: Mortgages are meant to be long-term loans. Paying off the balance early won’t help your chances of getting approved for a new mortgage – but it won’t hurt your chances, either.
Myth 13: Other Purchases Won’t Interfere with My Mortgage Application
Reality: Many borrowers don’t realize that their credit will get pulled again prior to closing. Any other purchases you have made will be included, and they can go against the final decision.
Myth 14: The Listing Price is Non-Negotiable
Reality: The listing price is often just a starting point. Many sellers expect buyers to negotiate. Conduct thorough research on comparable properties in the area to make a competitive offer. This is where working with an experienced Realtor comes into play. Your Realtor can provide insights into local market conditions and help you negotiate effectively.
At A and N, we’re dedicated to helping you navigate the homebuying process with confidence. Understanding the realities behind these common myths can empower you to make informed decisions and achieve your dream of homeownership. Ready to take the next step? Contact us today to explore your mortgage options!
