I stumbled upon this Zillow article a little while back and thought it would make for an interesting rundown of things I sometimes see clients struggling with. Some of these things are simply not true. Others are exaggerated. Either way, buyers and sellers need to unlearn certain things about the real estate process before engaging in it. Read on for more.
MYTH: You need a 20% down payment. This hasn’t been required for decades! In fact, you can put as little as 3% down, depending on the loan or the location of the home.
MYTH: Your pre-approval rate is the rate you’ll get when you close. Interest rates adjust every day. So, what you see at pre-approval is based on current market conditions and other factors, and it can’t be “locked in” until you sign a purchase contract with the seller.
MYTH: You should wait to buy a home until prices are lower. Buying a home after prices go up can be risky, but so can waiting. In popular neighborhoods (like many in the Bay Area), it’s often better to go for it and not wait.
MYTH: Buying a home is always cheaper and a better investment than renting. Renting a home can be cheaper than buying in many places! The benefit to owning a home, of course, is that it will appreciate over time and build generational wealth.
MYTH: You should find a home before you apply for a home loan. It’s smart to get pre-qualified for a loan. It will give you more information to shop with.
MYTH: Buying a fixer-upper will save you money. Sure, maybe on the sticker price. But fixer-uppers need a lot more than just a fresh coat of paint. Generally, there are major issues that need to be tackled, not all of which are visible up front.
MYTH: You have to get your loan from the lender who pre-approves you. No, you have no obligation to stay with the lender you start with. Shop competitive offers and find the best fit before you go under contract.
MYTH: You shouldn’t buy until you can afford your ‘forever’ home. Selling a home can be costly, but if you wait to buy until you can afford that dream home rather than invest in a starter home, you may never buy at all.
MYTH: A 30-year, fixed-rate mortgage is always the best choice. Adjustable-rate mortgages (ARMs) can save thousands of dollars of interest over the life of the loan. That’s one example. There are other options!
MYTH: You can’t buy a home if you have student loans. Actually, those loans can hurt OR help your chances of buying a home – it can boost your credit scores but it can also raise your debt-to-income ratio for approvals. Consider every angle.
MYTH: You have to pay the seller’s asking price to buy a home. Definitely not. The seller’s asking price is simply what he or she hopes you’ll pay. Offers and counter-offers will bring you to a point of agreement in the end.
MYTH: You need excellent credit to buy a home. It’s good to have good credit, but there are great home loans and rates available for people with less-than-perfect credit too.
MYTH: Fall and winter are bad times to buy a home. It can actually work to your advantage to buy a home in seasons when most shoppers think it’s “bad.”
MYTH: You cannot buy a home if you are self-employed. The rules for getting a mortgage may be different for those who receive a W-2 from their employers, versus a 1099-NEC for being a gig or freelance worker. But it won’t stop you from buying!
MYTH: All lenders are the same when buying a home. You don’t just shop houses and rates when buying a home. There are also significant differences among lenders and you should find the best fit for you!
Happy House hunting an buying a home you love. We are currently seeing many price reductions, inventory is still low, but rates have come down. Thus if you have been on the fence, now may be a great time to buy with hopefully further rate drops and you can refi at that point. When I bought the home I am currently in, the rate was 8.5%. I ended up refinancing more than 8 times and currently have a 2.75% rate. Call me if you would like to chat about buying a home.