Shopping to buy your first home can be an exciting experience, but there are a lot of things you need to keep in mind. There are some general misconceptions about home buying that can intimidate or overwhelm you. Common home buying myths can sway you from a great home or even worse, they can stop you from even looking. The trick to becoming a successful first time home buyer is to know the facts from fictions. This article will break down seven common myths all first time home buyers should know. If you’re in the market for a new home or plan on becoming a homeowner in the future, then this article is a must read.
Myth 1: Only Shop Your Financing Options After Finding a Home
Fact – It is always wise to shop for your financing options first, and be ready ahead of time to use them in case you happen to bump into a good deal on a house. By learning your mortgage options first, you will have a better idea of the amount you can reasonably spend to make a home purchase successfully. You also know which homes will fit your budget and which ones do not. This also prevents you from spending time working toward financing a home that is outside your price range.
Myth 2: You Don’t Need a Home Inspection
Fact – The reality is your new home needs an inspection no matter what. Anyone who tells you that you do not need a professional to review and report on the health of your prospective home, is doing you the worst kind of injustice. “No inspection needed” is one of the myths that needs to be debunked, and debunked in a hurry.
The home buying process comes with an optional home inspection, meaning you can opt out of the inspection process if you wish. However, by choosing not to have your new home inspected, you are telling the seller that you are taking the house “as is”. Meaning you accept the house with all its problems; leaks, rotting wood, rusty pipes, broken tiles, etc. This is literally and figuratively a very dangerous move, as any home repairs will fall upon you as the homeowner after the sale is completed. Some things like in-wall mold or a stove gas leak, are serious safety hazards to you and your family.
Opting to have the inspection will add cost to the closing price, but it ultimately helps you identify parts of the home that need repair before you sign on the dotted line. You want to live in a home that is healthy and safe, period.
Myth 3: You’ll Save Money By Not Using a Real Estate Agent
Fact – As with any other issue touching on finances, people always tend to opt for the cheaper option so they can save a couple of dollars. Remember, everything has a cost … even saving money has a cost. You can quickly get yourself in deep water if you engage in home buying details you do not understand. For one, you may not have all the paperwork or provide all the required information. Even searching for a new home that suits your preferences is work that you may not be in a position to do very well by yourself. What about the closing process? These are just a few of the reasons why you need to partner with a good real estate agent. Also, if you’re thinking about relying on technology like AI app, do yourself a favor and read about the limitations of AI in real estate.
Myth 4: You Must Have Excellent Credit to Buy a Home
Fact – It is true that having a good credit score will boost your chances and give you a high probability of purchasing a home. It will also help you to get better interest rates on loans and secure other financial offers. However, that should not derail you from achieving your homeownership dreams.
Lenders always look at many factors when approving their loans. To get pre-approved for a loan other factors will also be considered, such as previous credit history with your lender, your time on a job, and even your debt to income ratio. So, you can still get good loan amounts with fair credit. If your credit needs work, put time into paying your bills and bring that score up, but you don’t have to wait until you have an excellent rating to get a good loan.
Myth 5: You Only Need a Down Payment to Close
Fact – In a perfect world, it is true that you would only be required to have the minimum down payment to close. However, in reality, other costs come with the down payment that you must dole out before you can successfully complete the sale.
Closing usually includes:
- Title Fees
- HOA fees
- Homeowners insurance to be paid in full
- Home inspection fee
- Real Estate Agent costs
- Closing costs on your loan
Myth 6: Always Go For the Mortgage Lender With the Lowest Interest Rate
Fact – In as much as cost is always a factor in just about everything, the differences in mortgage lender fees can matter even more when purchasing a new home. Mortgage lenders could be the difference between you landing your dream home or losing it to another buyer’s better offer. This is just one of the good reasons to choose a lender with the best reputation, even if their interest rates are slightly higher than others.
Myth 7: You Must Put 20% Down to Purchase a Home
Fact – Truth is, not everyone who is looking to buy a new home can afford a 20% down payment. It may be an ideal amount for both the bank and the seller, but some buyers may not have that amount saved up to give all at once. Which is why it is now possible to put down smaller down payments. You can always go for an FHA loan that offers as little as 3.5% down. Some banks also provide conventional loans for between 5% and 20%. You can choose which option works best for your situation to ease the pressure. Above all though, start saving now … the days of zero down payment homes is over.
When looking to buy a new home for the first time, it is wise to not believe everything you hear. There are numerous home buying myths out there that can easily mislead you. If you are not careful you could end up paying more than you planned to pay. Do your research and ensure you are well-prepared for the task ahead to avoid any unnecessary issues in the process. Looking for a Real Estate Agent? Before you start your hunt, read how AI will soon replace real estate agents as we know them!