4 misconceptions about buying a home
Buying a home for the first time can be intimidating. It’s a process that many are unfamiliar with and the financial implications are significant.
Here’s the good news—it doesn’t have to be so daunting.
Securing a home loan is faster and easier than ever before. And, with a variety of mortgage products on the market, you can find a loan that is uniquely customized to fit your needs.
If you’re on the fence but have some reservations, these are four common misconceptions about buying a home that may convince you the time to own is now.
1. It’s too expensive.
Start by reviewing your financial standing—your current earnings, debit-to-income ratio and credit score. Factor in what you currently pay each month for rent and other living expenses. Then, use an online mortgage calculator to help you get an idea of what you can afford. Depending on the price and type of property, you could very well find a home where your mortgage is comparable to your rent. Best of all, as a homeowner, you’ll be building equity and able to take advantage of tax breaks.
2. Pre-approval isn’t that important.
Getting pre-approval from a trusted, respected lender is a simple but imperative step, particularly in a market when home prices are up and inventory is down. As a buyer, you will need to formally apply for a mortgage either way, something that involves providing your lender with essential information, so they can review your credit score and finances. Getting pre-approved before finding a home makes you and your offer stand out and it enables you to make a strong offer on the spot.
3. You need 20% for a down payment.
If you feel you don’t have enough saved to buy a home, think again. While making a down payment of 20% or more allows you to avoid private mortgage insurance (PMI), there are still many options for borrowers with smaller down payments. For example, FHA home loans feature less stringent qualification and credit requirements, and down payment options as low as 3.5%. You can also explore the benefits of a loan with down payment assistance—Guaranteed Rate Affinity’s Give 2 You program provides qualified borrowers with 3% down a flexible grant of 2%.
4. 30-year fixed is the only way to go.
For buyers who seek a consistent monthly payment and want to settle into a home for the long-term, 30-year fixed rate loans are a wonderful option. However, adjustable rate mortgages, commonly known as ARMs, provide an opportunity to secure a lower rate and lower monthly payment for a 5-, 7- or 10-year “fixed period.” ARMs are an ideal option for borrowers who don’t plan on staying in a home beyond this timeframe.