If you are a first-time home buyer, you understandably may have heard a million things about buying a home, and unfortunately some of the them may not be correct. While there may be many things that you need to learn along the way to get the full story on buying a house, there are some common myths that can be debunked for you right now to help you make a better overall decision about your home buying plans.
You Need to Put 20 Percent Down
One of the most common myths relates to how much money you need to put down to buy a home. It was common and even required at one time to put 20 percent down, but this was decades ago. Some home buyers today will put 10, 5, 3 percent or less as a down payment. There are zero percent down programs that even reimburse you on closing costs, so you may have to put very little down to close on your home. However, it is wise to put some money as a down payment. This lowers your monthly payments, establishes equity and minimizes the chance that you will be upside down in your mortgage. Furthermore, the lower interest rates are generally associated with a larger down payment.
Your House Will Be an Investment
Decades ago, people purchased a home to be an investment or nest egg. They made their payments with the hope of building equity that could be recouped once they sold it, and some even made paying off their home their entire retirement plan. It is true that you can build a considerable amount of equity in your home over the years through mortgage principal reduction and value appreciation, but your home should not be viewed as an investment. There are costs associated with home ownership as well, such as property taxes, insurance, repairs, maintenance and more.
You Should Get Pre-Qualified to See How Much House You Can Afford
You should get pre-qualified early in the mortgage process, and the mortgage company will tell you how much of a loan you qualify for. Some home buyers will take this as the golden rule for how much house they can afford, but there is error in this. A mortgage company only takes into account your gross income and the expenses showing on your credit report when determining affordability. You may have childcare expenses, marina rent for a boat, an expensive lifestyle budget that you want to maintain and more that are not reflected on your credit report. It is best to use the mortgage pre-qualification with a grain of salt, and review your personal budget when determining the maximum monthly housing payment you can afford.
If you are interested in learning more about home buying or the mortgage process, you can get honest answers from a reputable real estate agent and mortgage broker. These two professionals can be instrumental in the overall home buying process and can help you to make a better decision about which home to buy.
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