Myth #1: Looking at homes is the first step in the homebuying process.
When someone is interested in buying a home, usually the first thing they do is start looking at properties. But remember, most people need to take out a mortgage to purchase the house and would need to know the loan amount they can qualify for to determine how much home they can afford. So starting your home shopping before being pre-qualified or pre-approved for a mortgage is putting the cart before the horse.
Therefore, before you start touring homes, consult with a mortgage loan officer to get pre-qualified or pre-approved for a mortgage. A pre-qualification means that a loan officer has reviewed the financial information you have provided, including your income, debts, assets, etc. – and has determined the loan amount you may qualify for. A mortgage pre-approval is when an underwriter reviews all your financial documentation and confirms that you are approved for a mortgage at a certain amount.
By being pre-qualified or pre-approved for a home loan before you start your home search, you have a more concrete estimate of how much you can afford, and you can show sellers that you are a serious buyer.
Myth #2: Your down payment is your only upfront expense.
Yes, with most types of mortgages, you’ll need to make a down payment, but that is not the only upfront cost you’ll have to pay, as you need to keep closing costs in mind too. Homebuyers can expect to pay closing costs between 2% to 5% of their loan amount, plus there are home inspection costs and moving expenses to consider, as well.
This is why it’s important to not completely drain your savings to put towards your down payment. It is also smart to keep extra money aside for any emergencies or other unexpected expenses that may pop up.
Myth #3: Your down payment must be 20%.
This is one of the biggest homebuying myths, as many people believe that you cannot buy a home without putting less than 20% down. The truth is that there are many down payment
assistance programs and specialty loan products that allow for lower down payments. For example, with an FHA loan, you can put down as little as 3.5% and with a VA loan, there is no down payment requirement.
With most loans, if you can put down 20%, then you will not be required to pay for private mortgage insurance (PMI) or mortgage insurance premium (MIP), which can save you a lot of money over the life of your loan.
Myth #4: You must have great credit.
When it comes to buying a home, the higher your credit score, the better, but you don’t need to have perfect credit to qualify for a mortgage. There are loan programs available that are specifically tailored towards those who have lower credit scores, such as FHA loans.
You can also take many steps to help raise your credit score, like checking your credit reports for mistakes and paying down debts. The better your credit score, the more likely you’ll qualify for a loan with the best terms and lower rates, which can save you money overall.
Myth #5: Spring and summer is the best time to buy.
Spring has traditionally been the most popular time to buy a home, with the summer months also being a busy time in real estate. But that doesn’t mean that you can’t, or shouldn’t, buy in the fall or winter too.
In fact, there are many benefits to buying during the colder months, including less competition amongst other buyers and more motivated sellers who may have listed their properties months earlier and the longer their home sits on the market, they may be willing to accept a lower offer.
There are a lot of misconceptions out there when it comes to purchasing a home, which is why it’s essential to seek the guidance of mortgage and real estate professionals who can help you achieve your dream of homeownership, even if you think you may not be ready.
Contact a Cross Timbers Mortgage loan adviser to explore your options, and let’s see what type of home loan you may qualify for!