Transitioning from renting to owning your first home can seem overwhelming at first. There is more financial responsibility and just plain adult obligations involved.
However, it is not as scary as you may think. With the right real estate professionals on your side, you should gather a clear understanding.
Read further to see which home buying myths our experts have debunked.
1. Heavy debt
Unless you are lucky enough to pay for your first home with cash, you will likely be taking out a decent sized loan, probably the biggest one of your lifetime.
This is not something to be afraid of. These loan payments are spread out between 15 to 30 years. As you pay monthly on your loan, you are also building equity on your home.
This is a great asset that can be utilized to assist with debt and financial woes in the future.
Investing in Real Estate can also help to build your credit by exemplifying creditworthiness.
With mortgage rates as low as they have been recently, it is the perfect time to spend your money wisely.
2. You need 20% down
This could not be farther from the truth. While 20% down is recommended, it is not necessary for some loan types.
For example, let’s look at 3 popular loan types’ minimum down payment requirements:
- Veterans Affair (VA): 0% down
- Conventional: 5% down
- Federal Housing Administration (FHA): 3.5% down
How are lenders able to afford to give out such low down payment requirements? They usually charge monthly private mortgage insurance, or PMI, in exchange.
This is good for first-time homebuyers who may not have a lot of cash upfront but can afford to pay a little bit more monthly. Chances are, you are overpaying for your monthly rent anyway.
There are also plenty of down-payment assistance programs to look into as well. Just ask your bank or mortgage provider.
3. Your credit score is not good enough
Rules for credit scores are not as strict as you think. Across the board, a credit score of 660 or above is considered good to mortgage lenders.
However, government-backed loans such as the Federal Housing Administration, or FHA, loan tend to have lower credit requirements.
Your income and debt-to-income ratio also play a factor in determining if a lower credit score is risky to loan out to or not.
4. It is a bad time to buy
Whenever you are ready is the best time to buy. The Real Estate market is always fluctuating, and you can not rely on waiting for “the right time”.
Good deals come around no matter if it is a buyer’s or seller’s market.
Also, having the right Real Estate agent on your side will make all the difference.