Education and news for smart DIY landlords!
Purchasing a home is a significant milestone in one’s life. But while everyone needs a home, not everyone can afford to own one. Houses can be expensive, which is probably why most people put off owning a home. They may be afraid of having too much debt in the future, especially when they’re still paying off their student loans.
Since buying a home might be the biggest financial decision you’ll ever make, it requires thorough considerations and preparations. However, there are myths about home buying that might needlessly discourage you from owning the house of your dreams. Shedding light on some of the myths associated with home buying might give you a better perspective. Here are five examples:
In the short term, renting may seem cheaper. But it would still depend on the type and the location of the house you’re buying. If you’re planning to live on the West Coast, you’ll be paying for more expensive homes. However, in other cities and many smaller towns, your mortgage and taxes might be less than what you’d pay in rent.
But even with an expensive house, paying your mortgage is more stable (fixed-rate), whereas rent can rise annually. Besides, if you’re renting, you’ll be paying for a home that will never be yours.
This myth is a common misconception that can lead buyers to end up with a more expensive mortgage. For the record, rates and fees vary between lenders. Some mortgage companies charge fees upfront, while others don’t. Some offer lower interest rates, others not so much. If you want to get the best deal, you need to do your research and compare each loan program. A slight difference in interest rates and loan terms can either cost you more or provide you with thousands in savings.
Perhaps the reason why many people are hesitant to buy a house is that they think they need to pay a 20% downpayment. But that is simply not true. In fact, many mortgage lenders offer loan programs that are advantageous for first-time home buyers. Today, the average downpayment for first-time buyers is just 6% and can go further down to 3% or even zero. However, a smaller down payment also means you have to pay a bigger monthly mortgage in the long term.
Having an excellent credit score might increase your chances of mortgage approval. But even when your credit score is far from perfect, it doesn’t necessarily mean you can’t be a homeowner. In addition to your credit score, lenders will look at several variables, including income, employment stability, collateral, and debt levels, before deciding whether you qualify for a loan or not.
A loan with the lowest interest rate may seem like the obvious choice. But in reality, it doesn’t always guarantee the most savings or the best deal. While interest rates are critical for every mortgage, it’s not the only thing to consider when choosing a home loan. You also need to consider the fees, closing costs, and loan terms, all of which are factors that will determine how much your mortgage will be and how much you need to spend outright.
For the most part, buying a house is an exciting experience, but it can also be stressful and overwhelming. There are many things you need to consider and money to save before deciding to be a homeowner. Sometimes the myths surrounding a home buying process only add to the pressure and uncertainties you’re already feeling. But exposing some of those myths will give you a better understanding of how homeownership works and help convince you to purchase your dream home sooner rather than later.