Top three most common misconceptions of buying a home
1. Bad Credit
Did you know that if you are paying $1000 or more in rent you could afford to own your own home. The first and most important thing to remember is without speaking to a lender you have no idea what you are approved for.
Speaking with a local lender is the best first step in seeing if you can qualify for a home loan and for what amount. I always encourage my customers to speak with two or three lenders. Find out if the person you are speaking with is a good fit for you, what programs they offer, and what time frame they can get a mortgage loan closed.
If you take that first step and learn you have some credit repair needed, that’s ok. A lender will be able to tell you if your credit score is to low what it would need to be and how to achieve that goal.
Maybe you need to pay off some debt. Maybe you have no credit and need to open a secured credit card to build a history with the credit agencies. You may be pleasantly surprised with a loan qualification approval. You’ll never know unless you ask.
Having the conversation is one of the hardest steps for people to take because no one likes rejection. Here is the great news it’s not rejection, but a great start to taking control of your finances and start the path to homeownership.
2. Don’t know if you will stay in that City or State
Did you know that owning your own home is a great financial investment for your future. In the years I’ve been a REALTOR I’ve seen and heard people move as quick as five years and as long as 13 years. Of course there are always exceptions to this and some people may have to move sooner or never move based on life events. That being said owning a home is an investment. If you pay rent that money could be going to your own mortgage and building equity. The longer you live in the home the more debt you pay off on your own home. Stop paying someone else’s mortgage with your rent money. When you have the loan paid down you have equity in your home. Think of this as your savings account. Home equity can increase over time if the property value increases or the loan balance is paid down.
3. Don’t think you have the money for a down payment
If you don’t speak with a lender you may assume this number is astronomical or unattainable. Did you know that there is grant money and different programs that your local City and County offer? A lender would be able to guide you through this process and educate you on whether you qualify for any programs offered.
The most common loans are Conventional loan, VA loan and FHA loan.
Conventional loans generally require a larger amount down. Buyers at a minimum would put 5% in order to obtain a Conventional loan. Though, Conventional loans may require monthly private mortgage insurance (PMI) for down payments under 20%.
VA loan requires no money down. If you have used your VA loan benefits this may very. If you don’t know what benefits are entitled to you I recommend you ask.
FHA loan requires a minimum of 3.5% down to obtain an FHA loan.
Contact the Active Life Realty Team for additional information or questions on buying and selling real estate.