Homebuyers — particularly first-time homebuyers — often have misconceptions about what it takes to become a homeowner. In this post, we set out to debunk a few common homebuyer myths.
Myth #1. You need perfect credit to buy a home
Credit is one of many factors your lender will review when qualifying you for a home. What you may not know is that stellar credit isn’t a prerequisite to buy.
Different home products have different credit requirements.
For example, you may be able to qualify for a government-backed FHA loan, USDA loan, or VA loan with fair credit. You may even be able to qualify for a conventional loan with less-than-perfect credit. Speak with a mortgage professional for details.
The report further mentions that the Washington D.C. area is one of the least affordable places to rent overall.
The affordability of renting vs. buying depends largely on where you live. But the assumption that renting is always cheaper than buying is one that can be debunked.
Myth #3. You need a full downpayment before buying
If downpayment savings is what’s holding you back from homeownership, there’s some good news here as well. You may not need to put the full customary 20 percent down to buy a home.
FHA loans permit as little as 3.5 percent down. VA loans and USDA loans even offer 100 percent financing to eligible borrowers. Some conventional loan products allow less than 20 percent down with mortgage insurance.
In some instances, you may also use gift funds to help with your downpayment. Several states and private organizations have downpayment assistance programs to help you make a purchase. Don’t let a downpayment stop you from pursuing the American dream. You may have options.
Myth #4. You should look for homes before you review mortgage options
It’s worthwhile to shop for a mortgage product before you start hunting for a home. Your mortgage lender may be able to do a prequalification to estimate how much you can afford based on your stated income, debt, assets, and credit.
The prequalification isn’t a guaranteed loan, but you can use it when shopping for homes to make sure that you’re considering ones within your budget.
Myth #5. You can’t negotiate
Lastly, home prices aren’t set in stone. You can make an offer of more or less than the list price depending on the situation.
Price isn’t the only thing you may be able to negotiate. You may be able to negotiate contingencies. You may be able to negotiate repairs and other maintenance. The closing date and warranties may also be negotiated.
You don’t have to draw up an offer on your own. An experienced real estate agent can help you determine aspects of the deal you want to negotiate.