Wednesday, February 06, 2019 / by Holly Northup
Buying a home is one of the biggest financial steps of your life and often comes with a lot of questions. As questions circulate, misconceptions arise. Oftentimes, these misconceptions cause misinformed decisions and sometimes even dissuade potential buyers from buying a home. How do you know what is fact and what is fiction? To ensure you have all of the facts, we’ve debunked seven of the most common home-buying misconceptions to give you a better understanding and grasp of buying a home in the greater Austin area:
Myth #1: You must make a down payment of 20 percent
While a 20 percent down payment is ideal so you can avoid paying private mortgage insurance (PMI), there are a variety of loan programs to help you get into the home of your dreams for much less:
- FHA loans can get into a home for a down payment as low as 3.5 percent.
- VA loans can get into that same home for as little as 0 percent.
Consult a mortgage lender about your options before assuming you have to make a certain down payment. You never know, you could get a better deal!
Myth #2: Since you have enough for the down payment, you’re all set
In most cases, the down payment is the only thing homebuyers save up for when they are searching for a home. On top of the down payment, you will have the following additional costs:
- Homeowner’s insurance to protect the property and your belongings
- Closing costs
- Appraisal and inspection costs to determine the condition and actual value of the property
- Monthly mortgage payments
- Utilities, property taxes, regular maintenance and repairs and more.
Saving for the down payment is a good start, but go past the amount needed for the down payment to ensure you can afford the additional expenses listed above.
Myth #3: A 30-year fixed mortgage is always the best option
A 30-year fixed mortgage may be the best choice if you plan to keep the home that long…However, if you only intend to keep the home for five to seven years, there may be other options (like an adjustable rate mortgage (ARM)) that are more appropriate. Remember, the longer the fixed rate, the higher your interest rate – meaning, you could be paying a higher rate for nothing. Before choosing a mortgage plan, think about how long you plan on living in the home – and, always consult your REALTOR® and lender for advice.
Myth #4: You must have a perfect credit score to qualify for a mortgage
While an excellent credit score – over 700 – may make it easier to get a mortgage with a lower interest rate, your credit score isn't the only consideration that goes into determining if you qualify for a loan. On top of your credit score, a lender will look at your credit history, savings, debt and more. Find out your credit score on FICO's loan savings calculator to see where you stand and how it will affect your loan interest rate.
However, take the information found online at face value. To determine how you REALLY stand, contact a lender in your area.
Myth #5: The seller’s asking price is non-negotiable
Much like buying a car, the offer you make on a home doesn’t have to be the full asking price. If you have good credit, pre-approval, and a down payment ready to go, sellers will likely negotiate with you rather than hold out for another buyer. Keep in mind, every market is different, as is every seller's approach to pricing his or her home. For example, some sellers will purposely price their property right at or just below market value to get multiple buyers interested. Consult your REALTOR® on what to offer and trust their recommendation – their expertise and knowledge of the market will ensure your offer is positioned to be accepted.
Myth #6: If you don’t have kids, the school district doesn’t matter
The neighborhood you choose matters, both now and when you consider selling. Even if you don’t have children, good schools are a sign of a good community. What does this mean for the resale value of your home? When the time comes to sell, your home will likely sell quicker and for more money than a comparable home in a rougher neighborhood. Location always matters - remember keep that in mind when buying your first home.
Myth #7: Since I have the Internet, I don’t need a REALTOR®
If you think you don’t need an agent because you have the Internet, think again! When you align yourself with a real estate agent, you receive assistance during every step of the home-buying process: help finding homes, inside information on properties and neighborhoods, and a skilled negotiator to help you navigate any bumps on the road to becoming a homeowner. Your REALTOR® is there to guide you – trust them!
Do you have any questions about buying a home in the greater Austin area? If so, give us a call anytime. We would be happy to provide guidance.