Buying a home is the American dream, but for many people it’s one they fear will never happen. After all, when it comes to the home buying process, there are a lot of misconceptions floating around. So, if you think owning a home is out of your reach continue reading. You may be pleasantly surprised as we dispel the most common myths about buying a home.
Here are the top five myths you need to stop believing about home buying:
Myth #1: You need a 700+ credit score.
While it is true your credit score often plays an essential role in getting a mortgage loan approval, it is only one of several factors. Moreover, with the availability of federally insured mortgages like an FHA (Federal Housing Administration) loan or a VA (Veterans Administration) loan, you do not need a perfect credit score to qualify. However, the higher your score the better your rate, so it is important to weigh the cost of moving forward now or waiting until your score improves.
Myth #2: You need a 20% down payment.
Let’s be clear, the more money you can put down on a home purchase, the better off you will be in the long run. With that said, you do not need a 20% down payment to purchase a home today. There are plenty of affordable mortgage loans available that offer down payments as low as 3% of the purchase price. When searching for a lender, inquire about down payment programs or check with your local or state housing development authority to see what is available in your area.
Myth #3: If you get denied, you are done.
Not all lenders are created equal. If you were denied for a mortgage loan in the past, all hope should not be lost for a home purchase. The important thing to remember here is the best lender will get to know you and understand your financial situation. They will take their time to help you understand why you were denied and make recommendations on how you can improve your qualification in the future. Most importantly, a good lender can help you understand the timeline of when you may be ready to apply again in the future once you have made the necessary adjustments to your financial situation.
Myth #4: It’s not the right time to buy.
It is likely you know someone who has made money on a home purchase or even a house flip recently. Buying a home is not the kind of investment where you should expect a quick or substantial return. Although there is an opportunity for equity building and appreciation in some markets, a home purchase should be considered a long-term investment. There is no magic in timing interest rates or the real estate market. The number one factor in determining when is the right time to buy is your ability to purchase without getting in over your head. Ultimately, the best approach is to buy a home when you are ready.
Myth #5: Renting is cheaper than owning.
Sometimes, renting is indeed cheaper than owning in the short term. Your rent may be less expensive than a mortgage payment, and you will likely have no maintenance or repair costs. However, if you plan on staying in the area long term, it may be wise to consider a home purchase when you are ready. Homeownership offers stable payments (as long as you choose a fixed-rate) whereas rent amounts can rise annually. Moreover, long-term homeownership provides you with the ability to increase wealth over time.
While the road to buying a home is sometimes burdened with obstacles, it is still one you can maneuver with the right plan and the right professional guidance.