Buying a home is one of the biggest decisions in life many of us will ever make, and there is a lot that goes into it, from the moment you start dreaming of your next home to the day your packing your belongings and moving. It’s important to go into this life stage with confidence, knowledge, and peace of mind.
Unfortunately, there are many longstanding myths and misconceptions about the home buying process. Whether 10,000 sqft or 1,000 sqft, these common myths can affect how everyday buyers think about everything from looking for their new home, to what it takes to qualify for a mortgage loan.
Ready to head into the home buying process with open eyes and ears? Let’s dive in and explore the true stories behind these seven common buying myths:
#1 MYTH: It’s Easy to Purchase a Home On Your Own
There are a lot of resources out there for home buyers. With Instagram and Facebook full of home tips and more real estate sites online than ever before, many eager home searchers tend to believe it’s easy to conduct a property search and seal the deal on their own. Many also believe they will save money by “cutting out the middleman” and going it alone.
In practice, there are many moving parts that go into finding and purchasing a property, including narrowing through potential listings, researching the local market, scheduling showings and viewing appointments, and a couple of more really important ones, like making an offer, handling negotiations, and knowing which home inspector or real estate attorney will best take care of you. Each of these parts will contribute to finding you your best home option at the best reasonable price. It’s a very complicated and time-consuming process, even under the best of circumstances — and it’s a lot to handle on your own. An experienced real estate broker can smooth out this complicated home buying process, making it easier for buyers at every step of the way.
During the home search, brokers have access to private listing sites, allowing them to see new listings well before they ever become available to the general public. Real estate brokers also have access to a deep network of home pros and other real estate agents, and can connect directly with listing agents who might have the perfect property for the perfect buyer. These professional advantages mean that a real estate broker can present buyers with that amazing listing which may otherwise fall through the cracks online, or find “pocket listings” which may not be available to those searching without a realtor. Brokers can also connect buyers with great toolkits that can help narrow and streamline the search.
When you’ve found a home, there’s a lot that goes into perfecting and making an offer, leading negotiations, and handling every step of the journey from contract to closing. Along the way, your broker can be a guide, a friend, a strategist, a teacher, and a sounding board, a resource you can trust to always make things easier. Your real estate agent can also help connect you with the other professionals you need throughout the process, thanks to their wide network of reliable partners working in the real estate industry. For example, your agent can recommend several loan officers they trust or have worked with previously.
And keep in mind, buyer’s agents are paid from the seller’s proceeds, meaning that you won’t need to pay a dime to take advantage of their deep well of knowledge and helpful service throughout your home buying journey.
#2 MYTH: The Best Way to Start Is to Look at Homes
Sometimes, you might hear that the best way to get started on a home search is to just dive right in, and start pulling up listings through Zillow or Trulia, attending open houses, or exploring a neighborhood looking for available Homes.
While it’s always crucial to approach the home buying process with enthusiasm and an open mind, it’s also important to remember that starting your search this way can set you up for difficulty and disappointment down the line.
What if you find and fall in love with a home, for instance, only to realize that it’s outside of your price range? What if you locate the perfect home with the perfect yard, but you don’t have the paperwork and real estate team in place, and you miss the opportunity to make an offer?
There are many different things to consider before starting your home search in earnest, including building your real estate team; getting a handle on your credit card debt, student loans and credit score; defining your real estate goals, wants, and needs with the help of your broker; and getting preapproved for a mortgage. With these steps taken care of, you’ll be in a much better position to focus your home search and buy with greater confidence when the time is right.
#3 MYTH: Having a 20% Downpayment
Some of the most common homebuying myths are all about downpayments.
There is a deep-rooted belief, for instance, that putting 20% of a home’s price down is a required step in order to qualify for mortgage financing. This 20 percent downpayment number is quite commonly cited. In fact, in a 2015 survey, 36 percent of Americans polled thought that a 20 percent downpayment was required to qualify for mortgage financing.
In reality? Buyers can often secure a downpayment for much less than 20%. In fact, here in Houston, there are many state and local programs that can help homebuyers to qualify for a loan with as little as 1 to 3% down.
Nationwide, one study recently found that 60% of home buyers were able to finance their home purchase with a downpayment of 6% or less! Generally, the average down payment on a house is 13%, and for first-time buyers, it’s at 7%, as per the National Association of Realtors’ 2018 Profile of Home Buyers and Sellers.
Remember, more than any “hard and fast” number, loan companies are interested in determining whether a buyer will realistically be capable of paying back the mortgage. To get a full picture, lenders will look at many different factors, going well beyond the amount of the downpayment.
At the same time? Another common downpayment myth is that a home buyer must fully save the amount of a downpayment on their own. In reality, there are many downpayment assistance programs and resources out there, designed for many different types of buyers, including first-time homebuyers, current homeowners, veterans, and more. To discuss all of your many options and determine what downpayment assistance programs may be right for you, don’t hesitate to get in touch with a Realtor at Houston Premium Homes Realty Group.
MYTH #4: You Need to Have Perfect Credit to Buy a Home
For buyers, it’s important to recognize that your credit score and history are important factors in obtaining a home mortgage loan. However, with that being said, there’s a lot of misleading information out there about credit scores and real estate — and it’s impacting how potential buyers think about their homebuying goals.
As a result, many home buyers tend to believe that a buyer must have perfect or nearly perfect credit in order to purchase a home. One study from the Wharton School of Business, for instance, found that many millennial consumers had not even considered purchasing a home, because they believed their credit scores disqualified them from getting a mortgage.
In reality, many people are able to secure a home loan and purchase a property with lower credit scores. As of 2016, reporting indicated that more than 50 percent of all approved loans came from buyers with FICO scores below 750.
For many home buyers, it may prove important to take steps to improve their credit score before attempting to buy a new home. This is an important conversation to have with your real estate broker. It’s also important to keep in mind that lenders will look at many factors beyond your credit score, and there are loan programs and options out there for all different types of home buyers. Your real estate agent can help you get a handle on your circumstances, and understand all of the options available to you.
MYTH #5: You Must Be Debt-Free to Buy a Home
Can you have outstanding debts and still qualify to purchase a home? There is a common belief that, in order to consider buying a home and qualifying for a loan, a future buyer should make sure that they have paid off all of their debts, including student loans and credit card debts.
While it’s important to take your debts and monthly expenses into account, it’s also important to be realistic. In today’s housing market, lenders realize that debt is a fact of life. Simply having some debts will not automatically disqualify you from securing a home mortgage loan.
Instead, lenders will take the bigger picture in consideration, and examine your debt-to-income ratio, or DTI, a metric that analyzes how much of your income goes toward covering monthly debt obligations. Generally speaking, prospective buyers with lower DTIs have a better chance of qualifying for a mortgage, and may secure a better rate. As long as your DTI falls within a certain range, lenders will typically qualify you for a mortgage loan.
The bottom line? Paying down debts and controlling your monthly spending may be an important step on your path to buying a home, but having some outstanding obligations does not have to be a deal breaker.
MYTH #6: You Should Only Consider a 30-Year Fixed Rate Mortgage
Many buyers tend to consider the 30-year fixed rate as the “standard” for home mortgages. Certainly, 30-year fixed rate loans are predictable, and can offer lower monthly payments as a result of stretching out the timeline for the mortgage.
But it’s also important to remember that, while 30-year fixed rate mortgages can offer better advantages and attractive terms to the right kind of homeowner, they are not the only option out there.
There are many different types of mortgages available, aimed at many different types of buyers. It all comes down to your wants and needs as a homeowner and home buyer. For instance, for those who may not stay in their home long-term, or who want to build equity more quickly, it may be worthwhile to consider a 15-year fixed rate mortgage, which can offer consistent monthly payments and lower interest rates than 30-year mortgage loans.
Buyers may also want to consider different types of adjustable-rate mortgage products. With an adjustable-rate mortgage, or ARM, an owner’s mortgage rate changes with market fluctuations on a set schedule, such as monthly or annually. The most typical adjustable rate loans are called “hybrid” ARMs, in which a buyer receives a set fixed rate for a period of time, and then converts to a variable rate down the line.
In other cases, buyers may want to consider seeing if they qualify for government-insured loans, such as Department of Veterans’ Affairs (VA) Loans, or Federal Housing Administration (FHA) Loans. Talking with a Houston Premium Homes agent can be a powerful first step in understanding all of your options and finding the strategy that will be the right fit for you
MYTH #7: You Only Need to Save for the Downpayment
When you’re looking ahead and planning for the purchase of a home, it’s easy to focus on the downpayment, and ignore the other costs and fees that are often part and a package deal of buying a home.
Among some first-time buyers, there is a belief that the only cost you’ll be responsible for covering right away is the amount of the downpayment. In reality, purchasing a home involves many moving parts, and buyers must be prepared to make payments above and beyond their downpayment, in the short-term and the long.
In particular, buyers should prepare for closing costs, which may amount to as much as three to five percent of the purchase price of the property. Closing costs will vary from home sale to home sale, but often include attorney’s fees, underwriting and processing fees, insurance costs, and loan application and appraisal fees, among others. Meanwhile, buyers should also budget for furnishing there new home and making minor repairs or cosmetic changes once they move in, as well as saving up to have an emergency fund of cash on hand, to cover expenses after the sale is finished.
Ready to Experience The Houston Premium Homes Difference?
At Houston Premium Homes Realty Group, our agents are hyperlocal experts who know just what it takes to help make the dream of home ownership easier. With our agents located all around Houston Texas, it’s never been easier to start bringing your biggest home purchasing dreams to life.
Whatever you’re looking for in a home, your local Houston Premium Homes agent can help you find it. Play room? Ample space for all your giant trucks? A chicken coop? We get you, and we’ll help put you in the space that will truly work for you, while making the process easier at every step of the way. And with our signature “One Company” approach, Houston Premium Homes can help guide you every step of the buying process, with mortgage and title services all readily available under one roof. From buying to selling to financing, easier is just in our DNA.