6 Home Buying Myths Buyers Must Stop Believing
Successful real estate agents understand what buyers think. Unfortunately, they’ve discovered that many clients hold fast to home buying myths. These false beliefs are getting in the way of closing on their dream home. Here are the six home buying myths buyers must stop believing:
- Buying A House Requires a 20 Percent Down Payment. According to a NerdWallet study, 44 percent of respondents believe 20 percent or more is required to purchase a home. While this was the standard, it is not always the situation today. A Federal Housing Administration (FHA) loan requires 3.5 percent down. A Veterans Affairs (VA) loan, for those who served in the military and their spouses, can be approved with 0 percent down. Qualified buyers can get approved for a conventional loan with a lower down payment by paying mortgage insurance (PMI).
- It Is Wiser to Pay Mortgage Insurance Than Pay a Large Down Payment While mortgage insurance seems like a small price to save a bank account from a zero balance, the cost can add up in the long run. Calculate the cost of PMI for the long haul and consider other options to pay less over the life of the loan.
- Cash is the Best Choice. Sad tales of first-time buyers getting ousted by all-cash investors are not the norm. Buyers with a loan and a low down payment can still be chosen to purchase the home. Don’t assume sellers will always prefer all cash offers because they want to close the loan quickly and without approval issues. A larger offer or a personal letter that appeals to the seller can help buyers get approved over an all-cash offer.
- It is Easy to Get Help with a Down Payment. Finding, applying, and getting approved for down payment assistance is often complicated. Most programs are locally run by the county or city. There are no national or state programs that provide down payment assistance. Applicants must be under a certain income to qualify for the help, with just a few exceptions, such as being a single parent.
- Never Put Down More Than 20 Percent. If a buyer is fortunate enough to save more than 20 percent of the purchase price for a home, it could be a wise idea to do it. A lender may offer a trustworthy borrower a lower interest rate. Plus, borrowers with a large down payment do not have to pay mortgage insurance.
- You Can Get a Loan for the Down Payment. Buyers can get help with the down payment, but the money must be a gift. If the lender believes the money is a loan, repaying it will be factored into the mortgage approval amount. The buyer will qualify for less money to purchase a home. A letter from the gifters must be provided to prove the money is a gift. Buyers should note it is a felony to lie on a mortgage application.
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