It can be intimidating and confusing when you take the initial steps to purchase your first home. A lot of myths can hold people back from starting their property search. In this article, we help clarify those misconceptions so you can utilize the right strategies and have the correct mindset on the route to homeownership.
- 20% Down Payment is Needed
A lot of people think that they need to make a down payment of 20% before they can obtain sanction for a home loan. This was the case some decades back, but it’s no longer true. Over many years, the average down payment for first-home buyers has stayed at a steady 6%. You can also apply for government loan programs that allow you to pay just 3.5% to acquire a home.
Today, you just need to be confident and comfortable in determining your down payment amount. Of course, you’d need to pay more for monthly mortgage installments (including PMI – Private Mortgage Insurance) if you initially place less than 20% of the property’s price, but you will be able to save money for other financial objectives and have a backup fund for emergencies.
- You Need an Excellent Credit Score to Obtain a Mortgage
Another myth that most people believe is that they need to possess an excellent FICO credit score of 780 or more to qualify for a mortgage. However, you can get a home loan even without a great score. In the last few years, a lot of mortgages have been approved for people with an average credit score in the range between 670 and 739.
Lenders also consider factors such as your down payment capability, DTI (debt-to-income) ratio and employment history to decide whether to give you a mortgage. The loan type you are applying for also determines the credit score you should have. Traditional loans are more strict and require a credit score of 620 or more. For FHA loans, however, a 580 score can be enough. Don’t worry if your credit score is a bit low. You can take steps to boost it before filing a mortgage application.
- Save Money by Not Hiring a Property Agent
Don’t try to save money by going without a real estate agent. The truth is that you can still get an agent’s services and expertise free of cost since their commission is typically borne by the selling party and is included in the price of the home. However, don’t make the mistake of going without a property agent in the hopes that the seller will offer you a discount. The results could be wasted money, time, and a lot of stress.
Realtors can utilize their comparables, negotiation skills, and expertise to help you buy your dream property for the lowest possible price. They can also help you understand complex property contracts and deal with aspects like contingency clauses, inspections, home appraisals and more.
- Spring is the Best Time to Start a Home Search
Conventionally, home inventory is greater in spring. Purchasers flood the market and a lot of sellers place their condos or single-family properties for sale. As a result, prices escalate and several offers are made on homes. Don’t fall for the myth that it’s best to buy a home only in spring. Each real estate market is different, and it’s advisable to consider the conditions of the local market, and your personal situation, before making a purchasing decision.
Everybody is motivated in spring and a lot of people look to buy or sell in a season with nice weather. In a few markets, however, you’d be better off starting your house hunting before or after spring. During winter, fewer homes may be available, but you may be able to find good bargains as sellers may be anxious to dispose of their property or might wish to relocate swiftly.