Not So Scary: Debunking Common Fears of Buying a Home
If you’ve never bought a home before, it might sound scary. There are a lot of misconceptions that float around and keep qualified buyers from finding their dream homes. Research goes a long way in combatting this misinformation. Here a few common home buying myths:
1. I need a 20 percent down-payment
A 20 percent down payment could lead to some ideal terms – lower monthly payments and interest rates, along with more banks willing to accept your offer. But lenders off different kind of loans, and depending on the conditions, you may actually qualify for a smaller down payment. BMO Harris reports that the average down payment for a home in America is actually 13.4 percent, and some buyers purchase with only 3.5 percent.
2. I’ll be locked in for 30 years
30 years is a long time! But you don’t have to commit to a 30 year mortgage. If you can afford higher payments, 15 years is an option. Not only will you have a balance paid faster, but you’ll ultimately pay less in interest. This is because in the beginning, you aren’t even paying towards the principal because it such a larger amount of money. But you work towards paying on the principal faster when you have a shorter term.
3. My credit score isn’t good enough
The question of what “credit score do I need to buy a home?” is a complicated one. It’s going to depend on your down payment, the type of loan, and the requirements of the specific lender. For a conventional loan, the typical minimum score starts at 620. FHA loans start at 580, but it’s even possible to get approved with a lower score if you have a high down payment- although it is unlikely. There are compensating factors lenders will consider, such as money in savings, employment history, and your amount of debt.
4. It’s cheaper to rent
According to investors.com, it is cheaper to pay a monthly mortgage than to pay rent in 42 states (including Indiana). This number assumes a 20% down payment, a 30 year loan, and the median list price for the area. So with a fixer-upper home or a larger down payment, you could even save more on a monthly basis. You also are working towards owning equity instead of making payments which you will never see a return on.
5. The asking price can’t be changed
You can make an offer that’s lower than the asking price. Just like when you request for a loan, the sellers are going to consider more than just the amount of money. If you have a fantastic credit rate and can prove you’re pre-approved, they might just yes because you are trust-worthy and they are motivated to sell. There’s also a chance something comes up in home inspection that can affect negotiations in your favor. So don’t be afraid to consider a home that is close but not exactly at your price point.
Buying a home is a huge commitment- but that doesn’t have to be scary. In fact, buying your dream home should be exciting! The right real estate agent will walk you through every step and make sure you feel confident about the buying process. Burning questions? All you have do is ask.