Are You Still Believing These Home Buying Myths?

First-time homebuyers face a number of obstacles in their journey to purchase their first home. It can be a terrifying, wonderful, exciting time, and they may be inclined to turn to friends, family, or the all-knowing Google for advice to get started on their path. And as well-meaning as all those sources may be, the reality is that there are still so many myths that are perpetuated about home buying that ultimately make things harder for the first-time homebuyer and can even stop them dead in their tracks.

So, let’s discuss some of the most common misconceptions I hear time and time again, so all my first-time homebuyers out there can start their journey feeling knowledgable and empowered.

“I need 20% down to buy a house.”

This is probably the most common misconception I hear from aspiring homeowners about purchasing a home. The idea of paying 20% upfront and financing the rest of the home dates all the way back to the Great Depression. And while 20% down was the norm for a number of decades back in the mid-1900s, that’s just not the case anymore.

According to a report by the National Association of REALTORS®, the average down payment on a home in 2021 was 7% for first-time homebuyers. There are a number of loan options created with first-time homebuyers in mind that can get you into a home for as little as 0% down with a VA or USDA loan, 3% down with a conventional loan, and 3.5% down with an FHA loan.

Additionally, you may qualify for down payment assistance programs that will actually pay your down payment for you. You can learn more about those HERE.

“It’s cheaper to rent than to own.”

When you’re calculating all the costs associated with purchasing a home, like your down payment, closing costs, monthly mortgage payment, etc., your monthly rent check may not look so bad. It may even initially appear that it’s cheaper to rent than it is to own a home. But, if you’re planning on staying in the same area for a while, owning a home makes a lot more financial sense long-term.

When you pay your rent to your landlord every month, how much return are you typically seeing on that money? The answer is zero. When you pay a mortgage every month, you’re paying down the balance of a loan that is ultimately earning you equity. This is why the average homeowner has 40x the overall net worth of the average renter.

Additionally, locking into a mortgage keeps your monthly payments relatively stable over the lifetime of the 15 or 30-year loan where rent is subject to increase every year. You can learn more about how to decide whether to rent or buy HERE.

“I need to pay off all my debt before I buy.”

Having debt, including student loan debt, does not automatically disqualify you from being able to secure a mortgage for a home. Lenders are less concerned with the amount of debt you have and more focused on your ability to afford your home payments within your monthly budget.

Lenders will look at your Debt-To-Income ratio (DTI) to determine just how much home you can afford. Your DTI is a measure of how much you spend paying down recurring debt (including the mortgage you’re applying for) versus your monthly gross income. As long as your debt doesn’t eat up the majority of your income, it will not stop you from buying a house.

“My credit score needs to be perfect.”

Less than perfect credit does not need to put a full stop on the home buying process. You can qualify for a conventional loan with a 620+ credit score and an FHA loan with a 580+ credit score. Sometimes, it can be easier to qualify for a loan than it is to pass a credit check to rent!

As your credit score increases, you will be able to secure lower interest rates and better loan terms, so working on your credit is never a bad idea. But your score doesn’t have to be as “perfect” as you may think.

“Now is a bad time to buy.”

Did you know that buyers have told me this in every single market I’ve ever worked in? It doesn’t matter what home prices are doing, where interest rates are at, how quickly homes are selling, you can always find a reason why “now is a bad time to buy.”

The reality is there are advantages and disadvantages to every market. Back in 2020, interest rates were at historic lows, making monthly payments more affordable than ever. However, homes were also selling for $100k - $200k over asking price. Now, interest rates have significantly climbed, but home prices have come down and buyers have the opportunity to get a home under asking price with financial concessions from the seller.

The best time to buy is when you can. If it makes financial sense for you to buy now, there’s no reason to wait. Real estate is a long game, and those who are successful buy when they can and hold long-term.

Want to learn more about starting your home buying journey? Reach out today for a no-pressure, complimentary consultation today!