…If you want to alleviate some of the uncertainty that comes with buying your first home, it’s time you learned the truth about 6 home buying myths too many consumers still believe.
The original article has been edited here for length (…) and clarity ([ ])
1. Working with a real estate agent is expensive
Actually, if you’re working with a real estate agent to buy a home, it’s free. Buyers usually don’t pay for the work their agents do in helping them find and make offers on homes. When you buy a home, the sellers typically pay the commissions of both your agent and theirs [with] the funds for this coming from the proceeds of the home sale…so there’s no good reason to skip working with a real estate agent if you are a buyer. (See also: 5 Things Your Real Estate Agent Wishes You Knew)
2. You need a down payment of 20 percent
…Many buyers mistakenly think that they need to come up with a down payment equal to at least 20% of a home’s final purchase price….but, fortunately, [however,] you can buy a home with smaller down payments. FHA loans, for instance, often require down payments as low as 3.5% of a home’s final purchase price. You can also qualify for conventional loans with down payments as low as 3%.
Remember, though, that you must pay for private mortgage insurance — better known as PMI — if you don’t come up with that 20% down payment. This can add extra costs to your monthly payments until you build up at least 20% equity in your home. (See also: Do You Really Need a 20 Percent Down Payment for a House?)
3. Spring is the best time to look for a home
Traditionally, buyers have flooded the housing market in the spring…but there really is no one time of the year that is “best” for buying a home.
You might even find better bargains on homes if you start your search before or after the spring. Say you start looking in the summer. There may be fewer homes available, but you’ll also find buyers who are willing to negotiate on their asking price as they become more desperate to sell. The same goes for winter, when sellers may be looking to relocate quickly. (See also: 5 Reasons Fall Is a Great Time to House Hunt)
4. The best mortgage is a 30-year, fixed-rate loan
The traditional 30-year, fixed-rate loan comes with two big positives:
- The monthly payment will only fluctuate slightly over the life of the loan, and
- the monthly payment is relatively low because the loan term is so long.
…[That being said, however,] a 30-year, fixed-rate loan is [not necessarily] right for every buyer. If you take out a 15-year, fixed-rate loan, you’ll have a higher monthly payment, but you’ll also pay tens of thousands of dollars less in interest. If you plan on spending five years or less in the home you are buying, an adjustable-rate mortgage (ARM) might even be a better choice because it comes with lower initial interest rates. Your best move is to work with a mortgage lender who can help you determine which loan product is best for you. (See also: Is a 15-Year Mortgage a Good Idea?)
5. Once a seller accepts your offer, your worries should be over
…After you and your seller sign a contract, your lender will require that you pay for an appraiser — about $400 to $500 — to determine the current market value of the home you are buying. If that market value isn’t at least equal to the money your lender is giving you, your deal could flop. For instance, if your appraiser judges that the home you want to buy is worth $150,000 and you’ve agreed to purchase the residence for $225,000, your lender might agree to only loan you $150,000. That means you’ll have to come up with the remainder out of your own pocket or convince the seller to lower the asking price. If these solutions aren’t available, your deal could fall through…
6. The value of the home you buy will always appreciate
We all hope that the home we buy will be worth more when it’s time to sell, and often, it is, but there are no guarantees that the home you buy will appreciate in value, no matter how long you hold on to it.
Don’t believe anyone who tells you that housing prices only go up. Those buyers who purchased in 2005 or 2006, at the height of the residential real estate boom, know that housing prices can go the other way, too. Many of those buyers are still living in homes that are worth less today than they were when they first bought them. (See also: 4 Worst Reasons to Buy a House)
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