Top 10 Home-Buying Myths
Buying a home is a major decision that comes with a lot of information to sort through. Unfortunately, there are many myths about mortgages & home-buying that can create confusion and lead to costly mistakes. Here are the Top 10 most common myths about mortgages & home-buying, debunked:
- Myth: You need a perfect credit score to get a mortgage. Reality: While a higher credit score can help you get a better interest rate and loan terms, you don't need a perfect score to qualify for a mortgage. Many lenders offer loans to borrowers with credit scores as low as 580 for FHA loans and 620 for conventional loans.
- Myth: You need to put 20% down to buy a home. Reality: While a 20% down payment can help you avoid private mortgage insurance (PMI), it's not always necessary. Many lenders offer loans with lower down payment requirements, such as FHA loans with a 3.5% down payment or conventional loans with a 3% down payment.
- Myth: You can't buy a home with student loan debt. Reality: Having student loan debt doesn't necessarily disqualify you from getting a mortgage. Lenders will look at your overall debt-to-income ratio and your payment history to determine your eligibility.
- Myth: Adjustable-rate mortgages are always a bad idea. Reality: Adjustable-rate mortgages (ARMs) can be a good option for some borrowers, depending on their financial situation and long-term plans. ARMs can offer lower interest rates and lower monthly payments initially, but they do come with the risk of interest rate hikes in the future.
- Myth: You should always go with the lender offering the lowest interest rate. Reality: While a low interest rate is important, it's not the only factor to consider when choosing a lender. You should also consider the lender's reputation, loan fees, and customer service. The most important thing to consider is how likely is the lender going to get it all done so you can close on the transaction. If the lender fails to deliver by the time your closing date comes and the seller is not willing to agree to an extension, then you could lose all of the money already put into the deal. It does not matter how low of a rate they promised if they falter at their job.
- Myth: You can't get a mortgage if you're self-employed. Reality: Self-employed borrowers can still qualify for a mortgage, but the process may be more complicated. Lenders will look at your income and tax returns to determine your eligibility. One issue that self employed buyers finds that holds them back is how much they are claiming on their tax returns. Initially, it seems great to claim less and therefore pay less in taxes, but when you are trying to purchase a home, the lender is going to use your taxable income, so be mindful of how you file your taxes during the years leading up to buying a home.
- Myth: You don't need a home inspection if the home looks good. Reality: Even if a home looks good, it may have hidden problems that could cost you thousands of dollars down the line. A home inspection can uncover any issues with the home's structure, plumbing, electrical, and more. A good home inspector is imperative to the home-buying process so be cautious with using the cheapest one you can find. Sometimes you really do get what you pay for.
- Myth: You can't buy a home if you have a foreclosure or bankruptcy on your record. Reality: While a foreclosure or bankruptcy can hurt your credit score and make it harder to get a mortgage, it's not impossible. You may need to wait a few years and rebuild your credit before applying for a mortgage.
- Myth: You can't negotiate the price of a home. Reality: You can always try to negotiate the price of a home, especially if it's been on the market for a while or needs repairs. Your real estate agent can help you with this process. Make sure to find one that you trust and has your best interest in mind because they are there to protect you.
- Myth: Your mortgage payment is the only cost of owning a home. Reality: Owning a home comes with many other expenses, such as property taxes, insurance, maintenance, and repairs. You should budget for these costs in addition to your mortgage payment.
In conclusion, it's important to separate fact from fiction when it comes to mortgages & home-buying. By understanding these common myths and the reality behind them, you'll be better equipped to make informed decisions about your home purchase.