If you’re a first-time homebuyer, prepare to receive plenty of unsolicited advice. Friends and family will tell you what you should and shouldn’t do simply because they think they know it all. They mean well, but it’s important to understand that what worked for them may not work for you. Besides, there’s plenty of evidence that can disprove their advice.
To help you, we’ve compiled a couple of common myths about buying a home. That way, you can turn to actual facts.
Myth #1: You shouldn’t hire a real estate agent
While it’s true that you can search for homes for sale on your own, if you forego hiring a real estate agent, you won’t be able to get the best deals. Real estate agents are trained to negotiate so you can save a substantial amount of money. Remember that some sellers won’t be willing to lower the price unless they’re dealing directly with a realtor. If you don’t hire a realtor, chances are that you’ll end up spending more than you intended. Plus, they have access to private listings that usually include high-priced properties that you’d never be able to buy on your own.
Alternatively, you could enlist the services of a South Florida property management company to help you search for vacancies in your area. Aside from that, they can inspect the home to ensure its soundness. That way, you won’t end up with a home that needs thousands of dollars worth of repairs.
Myth #2: You need to pay 20% as a downpayment
This is the biggest home-buying myth out there. If it were true, it would mean that you’d have to have $80,000 readily available to buy a $400,000 home. Fortunately, this is false. You do not have to pay twenty percent as a downpayment. It’s more of a “recommendation” than a rule. In reality, you’ll have to pay only twelve percent according to the National Association of Realtors (NAR). First-time buyers can benefit from a lower down payment of seven percent.
However, you should still consider putting down as much as you can. A lower down payment means more interest, which is something you don’t want. So, if you can handle the twenty percent down payment, by all means, go for it.
Myth #3: You need a good credit score to apply for a loan
It’s common for homebuyers to be discouraged to apply for a mortgage because they don’t have good credit scores. Although a good credit score can help, its absence doesn’t mean you’ll automatically be ineligible for a loan. The criteria for the minimum credit score differ for each lender. You can even get a mortgage with a credit score that’s as low as 620!
Additionally, aside from your credit score, lenders also consider your income, credit history, debt-to-asset ratio, and so on. So, even if you have a poor credit score but you have a stable source of income, you’ll probably be able to take out a loan.
Still, you should consider building up your credit score to around 580. Remember, a bad credit score can impact your interest rate and loan amount.
Myth #4: You don’t have to inspect the home
It can be tempting to scrap the inspection especially if you’re worried that someone else will beat you to buying your dream home. Buyer beware, though — when you buy a home, you also buy the problems that come with it. While you may be able to win the bidding war, this tactic isn’t the smartest strategy out there. It’s never a good idea to wave it.
By inspecting the home, you’ll be able to spot its potential issues, such as mold infestations. That way, you can compel the seller to repair the home otherwise you won’t buy it. An inspection can also save you from buying a home that’s beyond repair.
Myth #5: The listing price is the total amount you have to pay
Unfortunately, this isn’t true. The listing price is only how much you have to pay for the property. It doesn’t contemplate additional costs such as inspection fees, attorneys fees, closing costs, and so on. Additionally, you may also need to conduct repairs prior to moving in, as well as long-distance moving costs if you’re currently living far from your new home. If it’s a fixer-upper, you’ll need to consider the potential of an entire home remodel. You need to consider all of these cost factors and not be swayed by the seemingly low listing price.
Pro Tip: If the home is a fixer-upper but you really want to buy it, a property management company can estimate how much you’ll have to spend on repairs.
Myth #6: You should buy a home that’s equal to the loan amount you qualify for
First-time buyers often fall for this. They end up buying a home that’s equal to the loan amount that they qualified for. It’s important to note that although your lender may have approved your loan, ultimately, you should decide how much you should spend. In other words, be sure that you can actually repay the amount.
To set your budget, consider your debt-to-income (DTI) ratio. Under the DTI ratio, not more than 36% to 41% of your monthly income should go into paying for your mortgage. So, assuming that your income is $6,000 a month, only $2,160 to $2,460 of that should be set aside for your loan payments.
Myth #7: You need to pay off your student loans first
Have you been told that you need to pay off your student loans first? Don’t believe a word they said. Your loan may be approved as long as you prove that you have the income to cover your loan payments, student loans, and other debts. Hence, as long as the lender deems your income “acceptable”, you can probably buy the home of your dreams.
Don’t let these home-buying myths discourage you from buying your first home. While it’s true that homes aren’t cheap, it’s also true that anyone can buy a home. With a property manager from Luxury Property Care by your side, you’ll be able to buy a home that’s within your budget, as well as secure a loan at reasonable interest rates.
Our property managers are here to help you through the home-buying process. We’ll make sure you don’t end up buying a home that you’ll regret.