3 Myths About Buying a Home
Are misconceptions about buying a home holding you back from pursuing the dream? There are many myths out there when it comes to buying a home, and it’s important that you understand the facts. Read on to learn the truth about buying a home.
Myth #1: The 20% Down Payment
You have to have a 20% cash down payment in order to buy a home, right? WRONG! Most people overestimate how much is needed for a down payment. While a larger down payment can drive down your monthly mortgage, it isn’t absolutely necessary. Lots of loan programs available allow for lower budgets. For example, those who qualify for an FHA loan can pay as little as 3.5% down, while VA loans allow as little as 0% down for a mortgage.
Something else to consider: The time you spend saving for the down payment is also the time you’re not building equity and putting your money to work in a home. This means that in some circumstances, it can actually be a better financial move to buy as soon you are able – without waiting to save the 20% of your purchase value.
Myth #2: “High” Mortgage Rates
Are mortgage rates high right now? Well, that depends on what you compare it to. Historically, interest rates have been much higher —in the 70s and 80s, they were at least twice as high as they are now! But here’s the thing: Mortgage rates are constantly fluctuating. For example, the 30-year fixed rate average started September 2019 at 3.49%. By mid-September, they had climbed to 3.73% – and then fell back again to 3.65% the following week.
If your goal is to buy a home and you’re in the financial place to do so right now, then that’s what you should focus on – and there’s no reason to put off homeownership just because rates go up a quarter or even half a percent. And if rates really plummet in the future, refinancing could be an option.
Myth #3: Perfect Credit
The average American’s credit score is in the high 600s (around 680), but most actually believe you need a score of 780 or higher to buy a home. That’s a lot of people missing out on home ownership due to a big myth!
The Federal Reserve reports that 90% of U.S. mortgages taken out in the first quarter of 2019 were by home buyers with a score of at least 650, and 75% had a score higher than 700. While it’s typically true that a higher credit means a better interest rate and loan options, it doesn’t mean you have to be perfect – and many other factors can also influence the mortgage-approval process (like the cost of the home, the size of the down payment and your income). If you aren’t sure about your credit score or how your financial situation will impact your ability to purchase a home, let’s chat today. We have some great resources!
Whether buying your first home or your fifth, understanding your options will make the mortgage process easier. Get in touch today to learn more about how to become a first-time or repeat home buyer!