8 Home Buying Myths To Stop Believing Right Now
While plenty of people have managed to get their foot on the property ladder, a surprising number of people still believe some pretty misleading myths about home buying. Whether you’re hoping to purchase your first home in the next few years, or you already own property, chances are, you’ve heard at least one of these untruths before. Keep reading to discover which home buying myths are leading you astray so that you can start making informed, smart decisions when you buy your next home.
1. You always need a 20% down payment
A surprising number of people assume that a 20% down payment is not only the norm, it’s a necessity. However, while having a 20% down payment will certainly help you secure the property of your dreams, it’s not actually always essential.
For instance, FHA loans offer mortgage loans that require only a 3.5% down payment. Of course, while making a smaller down payment might make home-buying more of a possibility for you, if you can afford to put down a little more money, it’s usually beneficial to do so as this can lower your monthly payment amount.
2. You need a perfect credit score
For most people, home buying means taking out a pretty hefty mortgage loan — and this means getting approved by the bank. Many people assume that a perfect or close to perfect credit score is essential. However, it turns out, plenty of people manage to secure mortgages despite having questionable credit scores.
According to the U.S. Federal House Administration, you only really need a 580 credit score to qualify for some loans. The lowest is 300 and the highest is 850. As you can see, there’s no need to wait until your score is pristine before you start house hunting!
3. You don’t need to use a real estate agent
If you have a friend who swears that they found it easier to buy their home without an agent, this friend is most likely the exception to the rule. For the most part, it’s always beneficial to have a real estate agent to help you out.
This is because realtors know the ins and outs of the market and they are experienced in negotiating. Not only can an agent help you to find the home of your dreams, they can also help you to negotiate the price down to a more reasonable amount. In the long run, they will almost always be a more cost-efficient option.
4. Buying a fixer-upper means you’ll add value to your home
Many people in the market for a new home are under the impression that spending a little less on a run-down property will pay off in the long run, after a series of renovations. However, this isn’t always the case.
First, unless your renovations add more value to your home than they cost, you’ll still be losing money on the home. Additionally, it’s impossible to predict exactly how much value will be added by your renovations. Market prices can fluctuate from year to year, so even if your value initially increases, you may end up losing money if you sell in the future.
5. You should always look for the lowest interest rate
When it comes to choosing a mortgage loan, it can be incredibly tempting to search for repayment plans that feature low interest rates. You may think that this low rate will save you money over time, this isn’t always the case.
To begin with, some lenders offer lower interest rates because they are charging higher amounts for closing costs. It’s important to research these costs to make sure this lower rate is still the best deal. Also, lower interest rates are typically linked to shorter loan terms. This means you may be paying more each month. If you can afford your monthly amount, then great — if not, you may find that your finances will be more stable if you pay a little more over a longer period.
6. All you need to save is your down payment
Some first-time buyers become excited about the prospect of purchasing their first home, and forget to plan about additional costs that can come with home buying. While saving enough for your down payment is important, it’s also key that you start to think about additional costs so that you can budget accordingly and avoid disappointment. Extra costs can include valuation fees, conveyancing fees, stamp duty, insurance, and so on.
7. Your only ongoing cost will be the mortgage
While your down payment won’t be your only initial cost, your mortgage payments will also only be a portion of your homeownership costs. You’ll also need to think about bills, repairs, new appliances, insurance, and so on.
8. If your mortgage application is denied, you aren’t ready to buy
Lots of people get downcast when their first mortgage application is denied and assume that they won’t be able to purchase their dream home. However, if your first attempt at securing a loan is denied, you shouldn’t give up. Find out why your application was denied and see if you can alter something about your application to make yourself more appealing to lenders the next time around.
Finding a Real Estate Agent to Help You Get a Foot on the Property Ladder
Here at Homeway Real Estate, we have the experience and knowledge to help you through every stage of the buying process. Plus, we’re pretty clear-sighted when it comes to home buying myths, so we’ll always make sure you get the correct information so that you can make intelligent decisions about your mortgage and your home.