The home-buying process can seem mystifying if you’ve never done it before. The decision to purchase a house can make a serious impact on your life and finances, and it’s not something to be approached lightly.
With that said, many people have misconceptions about what the process entails, blocking them from the easiest route to homeownership. Here are a few:
Renting is Cheaper than Buying
Rent prices have skyrocketed over the last couple of years, making the average cost of renting roughly the same as a mortgage payment. While there are much higher up-front costs associated with buying, ranging from the down payment to closing costs, these are balanced out over 4-5 years of making principal payments.
Not Using a Real Estate Agent Saves Money
While real estate agents get a 3% commission on average, the buying agents’ fee is paid by the seller and built into the price. Every seller expects to pay a buyers’ agent commission, and if you think you can show up without one and get a 3% discount, you’re sorely mistaken. Real estate agents will help you get the lowest purchase price through their expertise.
You Need a 20% Down Payment
While it used to be true that you needed a 20% down payment to get approval for a mortgage, that’s no longer the case. FHA loans are more available than ever, allowing homeowners to put just 10% down if their credit score is over 500, and you only have to put 3.5% down if your credit score is over 580.
You Should Buy a Home for the Maximum You’re Qualified For
Just because you get approved for a home loan up to $500,000 doesn’t mean you have to buy a $500,000 house. You’ll end up having to factor in expenses that aren’t included in your debt:income ratio to determine your ability to afford a home, from entertainment to raising kids.
You Don’t Need a Home Inspection on Newer Homes
Homebuilders make mistakes, so even if you’re buying a newer home, it still needs to be inspected for your own protection. This will allow you to uncover any items that may cause issues in the future, further allowing you to get them repaired before you close on the mortgage. The average home inspection is between $300 and $400, so it’s well worth the investment.
Source: The Lenders Network