Finally ready to make the transition into home ownership? That’s awesome! In this exciting time you’ll probably turn to experienced friends and family for insight into the process. However, myths and misinformation spreading around, so let’s clear the air.
1. THE FIRST STEP IS SEARCHING FOR A HOME
You know the saying, “Don’t put the cart before the horse,” well that’s important to remember when it comes to buying a home. You don’t want to start looking for a house until you have met with a lender to discuss your pre-approved amount. If you fall in love with a house that’s $350,000 only to find out you’re only qualified for $300,000, you can get your hopes crushed before you have a chance to really being. Don’t start the process on the wrong foot. Make sure the numbers line up.
2. YOU DON’T NEED A REAL ESTATE AGENT
When buying a home, 99% of the time the buyer’s agent fees are paid by the seller. The amount is set by the seller and the seller’s agent during pre-listing negotiations. That random 1% represents odd circumstances that don’t apply to most buyers. By using an agent, you’re getting the knowledge and expertise of a professional real estate agent for free. Having an agent on your side means you’ll get to see homes that aren’t readily available on public searches, have access to private viewings of any home you choose, avoid outdated listings and scammers (there are lots of them), and have professional help navigating the legalities of contracts and home buying. To top it off, the home buying process often leaves buyers and buyers and sellers with lots of questions. Have an agent on hand? Hello walk, talking, friendly font of real estate knowledge (not to mention full list of contractors and working relationships with experts in all fields related to real estate)! Why wouldn’t you want an awesome negotiator working to ensure you get the best from the transaction? For FREE!
3. YOU MUST HAVE STELLAR CREDIT
Fortunately, for some, this is a myth. Lenders and banks offer options, and lenders can work with credit scores down below the norm. If you’d like recommendations, ask me. I can help you connect with several lenders. Talk to a few! They each offer slightly different products and services. There are many factors that go into loan pre-approvals, but your credit doesn’t have to be a sore thumb during the process. However, if your credit is low, you’ll be doing yourself a favor if you connect with a credit repair specialist to work those numbers up into the 600’s. A better score will lower your interest rate.
4. YOUR DOWN PAYMENT HAS TO BE 20%
Think you have to sell an arm and a leg to buy a home? Not at all! An FHA loan only requires 3.5% down while a conventional only requires 5% down. USDA and VA loans are the most popular 0% down programs. If you qualify, these can take a big chunk off the amount of cash you have to bring to the closing table.
5. DOWN PAYMENTS ARE THE ONLY UPFRONT COST
This is one of the biggest misconceptions. There are many of cost that go into buying a home, and those include upfront costs like the earnest money deposit, home inspection, and appraisal (more about those later). Aside from your down payment and those costs, you’ll need to pay your closing costs. Closing costs can range from 2-4% of the purchase price. At one time, buyers could negotiate to have the sellers pay some, or all, of their closing costs. In today’s market, buyers are expected to pony up and pay most, or all, of their own closing costs.