Several adages, sayings, and myths prevail in the real estate industry. Here are some common homebuying myths debunked!

Buying a home is one of the most exciting and also complex financial transactions. And if a journey of a thousand miles starts with a single step, we want to ensure that your first step in the homebuying process doesn’t deter you. Unfortunately, well-meaning advice from friends and family could start you out on the wrong foot. These homebuying myths may cost you money or even prevent you from achieving your homeownership dreams. Keep reading to learn more.

Key Takeaways:

• You don’t need a perfect credit score to secure a mortgage.

• A 20% down payment may help secure better loan terms, but it’s not necessary.

• Renting isn’t always more affordable than buying.

• A real estate agent is indispensable when buying a home.

• Waiving a home inspection can result in buyer’s remorse- so don’t waive!

You Need an Excellent Credit Score

With the housing market crisis and the number of mortgage defaults and foreclosures increasing, mortgage lenders have tightened their lending criteria in the past few years. However, that doesn’t necessarily mean that you must have a perfect credit score to qualify for a mortgage to finance your home purchase. There are several mortgage options for homebuyers with low credit scores:

• Conventional mortgages typically require a 620 minimum credit score, but a higher score can help you receive lower interest rates.

• Depending on your debt-to-income (DTI) ratio and down payment, you can qualify for an FHA loan with a 580 credit score, and maybe even lower with a higher down payment. 

• For a USDA loan, many lenders require a minimum credit score of 640, although some might go as low as 580. 

• The Department of Veteran Affairs doesn’t typically have a minimum credit score, but many lenders will require a credit score between 580 and 620.

Essential Note: The better your credit score, the better interest rate you can qualify for and you’ll have more mortgage options. However, if you have a few dings on your report, you can still pursue your homeownership dream! That’s because lenders look at a variety of financial aspects, including your income, past rent payments, employment, monthly debts, and more. These aspects play a significant role in your ability to secure a mortgage.

You Need a 20% Down Payment

Generally, you’re better off when you have a larger down payment. In fact, having a 20% down payment takes most of the additional mortgage requirements, such as premium mortgage insurance off the table. That can save you over 1% annually on the cost of the mortgage. But although it’s clearly better to have a 20% down, it’s a real estate myth to say it's required or necessary. The time you take to save money for the down payment is also the time you aren’t building equity. Hence, it’s wise to buy as soon as you can, without waiting to have a 20% down. Moreover, the mortgage marketplace has innumerable programs and products available for borrowers with lower down payment funds. For instance, homebuyers who qualify for a VA loan can secure a home loan with 0% down and those eligible for an FHA loan can pay as little as 3.5% down. Besides, mortgage lenders today offer strong incentives, especially for first-time homebuyers, which don’t require the full 20% down payment. 

You’ll Save Money By Renting Instead of Buying

It’s a common real estate myth that renting is always more affordable than buying a home. In fact, several potential homebuyers keep renting thinking they’re “saving money.” But Moreover, you could be throwing money down the drain. Consider this: when you rent a house, you’re paying the landlord. They take the money, pay their mortgage for the property, and pocket the difference. Down the line, when they sell the property, they get all the profits. What do you as the renter walk away with in the end? Unfortunately, nothing! 

Note: With rents on the rise, renting is becoming a far less affordable option. In fact, as surprising as it is, in most markets, a mortgage payment is more affordable than monthly rent.  

You Don’t Need A Real Estate Agent to Buy a Home

You might feel like a real estate agent isn’t necessary. However, an agent can help you lower the time you spend searching for a home, guide you through the mortgage process, help you negotiate, fill out paperwork on time, and close on schedule so you can move into your dream home. In fact, a buyer’s agent is legally required to help a homebuyer- they have a fiduciary duty to you and not the seller. Hence, you’ll be sure that the agent doesn’t have a conflict of interest from representing the seller. And in most cases, it’ll cost you nothing to enlist a buyer's agent. That’s because the seller pays the commission for both the buyer’s agent and the seller’s agent. 

You Don’t Need a Home Inspection

Home inspections are optional. And if you’re buying a home in a competitive real estate market, it can be tempting to waive your right to an inspection to make your offer look more attractive to the seller. However, that can be a costly mistake! A home inspection is meant to identify major issues with the house and is intended to protect you, the buyer. The home inspection will also provide you with a report, which you can use to request the seller to make repairs or to negotiate a lower purchase to cover these costs. Unfortunately, if you don’t get an inspection, you won’t have recourse if there’s a major problem like a leaking roof or water damage after you close on a home. 

Need Help Buying Your Home? Ask the Pros!

Now that we’ve busted some of the most common homebuying myths, you may be feeling more confident about buying a home. And while the road to purchasing a home is sometimes burdened with challenges, you can still maneuver it with the right strategy and the best professional guidance- and that’s where we come in! Our real estate experts have been helping our clients find and buy their dream homes for years, and would love to do the same for you! Call us now and let’s help you achieve your homeownership dream!