It can feel like everyone is suddenly an expert once you announce that you’re ready to buy your first home. While people chiming in are just trying to be helpful, anecdotal wisdom and advice from people who aren’t immersed in the local market can have the opposite effect. Are you ready to separate myth from reality when it comes to the top misconceptions about buying a home today? Let’s bring the clarity to help you chart a path forward in this very exciting market.
Myth 1: You Can’t Buy a Home Without Putting Down 20 Percent
Hopefully, this oft-repeated myth will die out soon. Yes, the tradition has been for lenders to want 20 percent. However, most buyers simply aren’t putting down 20 percent today. It’s possible to put down as little as 3.5 percent for FHA loans. If you qualify for a VA or USDA loan, you can skip the down payment. Even if you go with a traditional home loan that requires 20 percent down, there’s still a silver lining. Putting down 20 percent at closing means you can avoid paying monthly private mortgage insurance (PMI).
Myth #2: Renting Is Cheaper Compared to Buying
The sting of renting is that you’re essentially paying someone else’s mortgage every month. Many renters don’t realize that they’re actually paying more for rent than they would for an actual mortgage of their own in many cases. In many cities around the country, rents are costlier than mortgages.
It’s also important to remember that monthly mortgage payments are locked in at the same price each month until your home is paid off. Rent tends only to get higher and higher each year. Many people who wish they could own a home assume that the perks of ownership must come with a higher price tag. The general rule is that owning becomes more affordable than renting once you begin to spread away from metro areas.
Myth #3: You Have to Take the First Interest Rate You Get
You’re not just shopping for a home when you’re ready to buy. You’re also shopping around for a financial product called a mortgage. While shopping for mortgages is a delicate dance because you want to avoid having too many “hard pulls” of your credit report that could damage your credit score, it’s important to research quotes from multiple lenders to see where the most competitive rates can be found. You’re also under no obligation to accept an interest rate just because you’ve been approved by a lender.
Myth #4: You’re Doomed to Rent Forever If Your Credit Score Isn’t Perfect
The frank answer is that having a good credit score does put you in a much better position when buying a home. According to Experian, having a credit score of at least 750 will open up doors for the best interest rates. However, a score of 580 will still put you in the window to qualify for an FHA loan requiring just 3.5 percent down. If your score is 500, an FHA is still on the table if you can afford to put down 10 percent.
Striving for a higher credit score is always the best strategy as you prepare to become a homebuyer because higher scores translate to better interest rates that will save you money over the life of your mortgage. However, a person renting in any area is substantially more expensive than owning may prefer to jump into the market with imperfect credit because the higher interest rate will still put them ahead.
Calling All Future First-Time Buyers: Let Us Help You Tackle the Common Myths About Buying a Home
At Stevens Realty, we help first-time buyers move past the myths to make the dream of owning a home a reality! Let us help you tackle the big questions about how to buy a home here in Arizona based on industry experience and knowledge about the local market. Call or email us today!
We are Keith and Janna Stevens, and we’ve been in the realtor game for years now. We’ve learned a lot along the way and want to share that experience with you. Enjoy our blog, and when you’re ready to buy or sell your home, be sure to reach out to us!