Most of us will only buy a home a few times in our lives, so it’s hard to know fact from fiction when it comes to making good decisions. Here are some common myths debunked.
Myth #1: When buying a home, the first thing to do is look for a house. Nope! The first thing you should do is find a Realtor. Then his or her first job will be to help you find a loan officer so you can get pre-approved (not pre-qualified) for a home loan. Once you’ve done this, your Realtor will sift through all the houses on the market and show you those that fit your lifestyle and your budget.
Myth #2: A 30-year fixed mortgage is ALWAYS best. While I tend to believe 30-year fixed rate mortgages are almost always best, some circumstances call for shorter terms or adjustable rates, which can save you money.
Myth #3: You must have a 20 percent down payment to get a home loan. This simply isn’t true. In today’s world, there are many programs with low or no down payment options. Government programs through the USDA and FHA offer loans to people who cannot afford a 20 percent down payment. If you are a military veteran, you may qualify for VA no-down payment loans. Work with a loan broker to review your financial resources, income and credit history to find the loan best suited to your needs and circumstances.
Myth #4: The only cash you need to buy a house is the down payment. Unless you are buying a house from your mom and dad and they are also paying for your loan fees, mortgage insurance, title insurance, escrow fees, and all the inspections and repairs needed before you move in, you’ll definitely need more cash than simply your down payment.
Myth #5: You can’t buy a house if you have bad credit. You can, but it’s more expensive. If you have good credit, you will get a vastly superior loan with a smaller required down payment and lower interest rates. However, I have a source for home loans for people with bad credit. It does require a lower loan-to-value ratio, which equates to a higher down payment or a guarantor on the loan, but it is available. Regardless of your credit score, you’ll be required to prove you can make the loan payments each month before anyone will lend you money.
Myth #6: Home inspections are unnecessary. Not true unless you plan to raze the house and rebuild from the ground up. Especially if you are tight on cash, a home inspection is important so you know what you’re getting into. The last thing you want to discover after you move in is that the roof should be replaced in two years and the furnace needs to be replaced next month.
Myth #7: The seller will be offended if you come in with an offer under the asking price. Most sellers would prefer an offer below their asking price as compared to no offer at all, as long as the offer isn’t frivolous.
Myth #8: Realtors aren’t really necessary. Okay, I’m a little biased here, but Realtors are necessary. They have access to all the local properties for sale (not just those listed online). They know which professionals are good and which ones aren’t when it comes to home inspectors, insurance agents, loan officers, pest and fungus inspectors, contractors, and others. Realtors will negotiate on your behalf, make sure you have all the necessary disclosures, saving you time and money. Choosing a For Sale By Owner property and not using a Realtor yourself can lead to expensive legal mistakes. Your Realtor is your advocate. I wouldn’t buy a house without one.
If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or visit www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.