When it comes to buying your first home, there’s quite a bit to learn and it can be intimidating. Complicating the process is the misinformation that seems to flourish on the internet. By dispelling some myths, you’ll better understand the home buying process.
- All Home Purchases Require a 20% Down PaymentThis isn’t always the case, though it is a general rule of thumb. If you don’t have the full 20% of the purchase price, some lenders will let you put just 5-10% down, though that means you’ll also have to obtain private mortgage insurance (PMI). Alternatively, government subsidized loans through the Federal Housing Administration(FHA) will let you buy your home with just 3.5% down. You can also check your local and state housing programs for additional down payment assistance.
- The Down Payment Covers EverythingUnfortunately, this is not true. If you’ve done any research on real estate, you likely already know that there are closing costs to be paid up front, as well. These can come to 4-6% of the home’s purchase price.
- People with Bad Credit Can’t QualifyAnyone can buy a home, even those with poor credit scores. While you likely won’t qualify for traditional loans, there are plenty of programs that assist people with bad credit in buying their first home. For example, people with credit scores under 600 can qualify for the FHA loan.
- The Home Inspection is OptionalWhile this is technically true, it’s in your best interests to go through with the home inspection. The walk-through with a qualified inspector can help you identify problems that could represent costly repairs. Before you commit to any real estate purchase, you’re best served by going through with this process.
- The Asking Price is Non-NegotiableThis is certainly not true, so don’t feel you have to offer what the seller is asking. Even a lower offer may be accepted, if your buying terms (such as your credit score, down payment amount, etc.) are favorable. Additionally, there may be more wiggle room on the price, if the home inspection turned up any major problems.
- A 30-Year Mortgage is Always Your Best OptionMost people just assume they will need a 30-year loan without considering the consequences. Since you’ll be borrowing the money for twice as long as you would on the 15-year loan, you’ll be paying that much more interest. If you can handle higher payments and want to pay the home off faster, consider the 15-year option. It will save you money in the long run.
Debunking these myths just gives you a starting point in your real estate research. Before you commit to anything, consider your options and learn as much as you can. Doing your homework ahead of time could save you hundreds or thousands of dollars down the road.
Robert Slack Fine Homes specializes in assisting buyers, from all over the world purchase their dream home in the sunshine state of Florida.