Are you planning to become a homeowner? Awesome! This is great news! Though property investments are a great experience, it is a scary process. You must rely on agents, family members, and friends for advice.
Over the past few years, many home buying myths have surfaced. These myths can increase the gap between you and your dream property. With this being said, there are few misconceptions about home investments. This article focuses on these misconceptions.
Myth #1 – Hunting for Properties
Do you want to experience the neighborhood? Do you have something specific in mind? If yes, you should sit down with the real estate agent. Does this sound familiar? Sitting down with real estate agents is a great move. Don’t browse for properties on day one. Immediate decisions and quick moves will increase the risk of you picking a wrong property. Many homeowners view properties that are too expensive or cheap. Browsing for homes is always interesting and fun. But, real investments mean lots of time and effort. You should become serious before you make a final pick.
Being serious means a better credit score and a pre-approved loan. These factors will decide what your actual budget is.
Myth #2 – Go for A Big Mortgage?
A lot of people believe that longer mortgages are better than cheaper payments. If you believe in this theory, think again! A lot of people pick 30-year mortgages over 20-year loans. But, try to imagine this: a 30-year mortgage can result in bigger payments. When compared to the 15- or 20- year mortgage, you will pay twice the amount. This can be attributed to the higher interest rates.
Imagine you have 1000 USD. Would you spend this amount on a home or somewhere else? If you are extremely focused, you should decide on a 15-year loan and spend the 1000 USD somewhere else. We don’t claim that lengthy loans are bad. However, they are not great. If you wish to save more, you must think beyond mortgages. Experts advise investors to choose adjustable mortgage rates. If you are not planning to live in the property for a long time, adjustable mortgage rates are apt for you.
Myth #3 – Your Down Payment Should Be Around 20%
Do you want to get rid of mortgage insurance policies? If yes, a down payment of 20% will be apt for you. However, lenders offer home buyers a down payment margin of 5 to 10%. If you are eligible, you can obtain loans with a down payment of 3.5%. The Federal Housing Administration offers this percentage.
Experts claim that there are hundreds of down payment options. Most of these options are designed for homeowners with rock-bottom incomes. Always remember that the federal and local government has many down payment schemes. These schemes are meant to help you.
Myth #4 – Your Only Up Front Cost would be the Down Payment
As you invest in a home, you will understand that properties come with many add-on charges. During the deal, sellers are responsible for the closing charges. The closing charge ranges between 3 to 8 percent. The final cost depends on many factors. For instance, you should pay taxes, agent fees, credit reports, insurance and inspection costs.
Myth #5 – You need high credit scores to buy properties!
Conventional buyers believe that a bad credit score can destroy their dreams of owning a property. Well, this is not how the real estate industry works. If you want to buy a property with a conventional mortgage, bad credit scores will be a problem. On the other hand, FHA loans can lend you a hand of help. These loans need a minimal down payment and are meant for buyers with low credit scores (below 600).