5 Home Buying Myths
Have you ever hopped on Google to research the generic symptoms of a cold just to land on some crazy self diagnosis? The same can be true of the housing market. If you're not careful during your research, many stipulations can lead you to believe the misconceptions around buying a home. It's easy to get caught up in all the jargon you read online when you begin your home buying journey. The best way to dodge all the misconceptions: leave it to the professionals.
Don't lead yourself to believe these 5 myths about buying your next home:
1. A 20% down payment is necessary
Although this may have been true many decades ago, it is certainly not true in today’s market. According to the National Association of Realtors, 6% is the average down payment for first time home buyers. There are government loans and programs that make it possible to put down a lower percentage. The FHA mortgage and VA mortgages are two ways that require little down payment to purchase a home. Although you don’t need 20% down, the drawback that leads most to this misconception is the extra cost of mortgage insurance you will have to pay for putting down a lower payment. However, this can be a good investment (for some) in the long run. Talk to your agent for more information before assuming 20% down payment is your only option.
2. It’s cheaper to rent than it is to buy
The word rent is typically associated with the misconception of costs being cheaper. However, don’t toss out the thought of buying before you look into it. Looking at monthly payment, renting is cheaper. However, after a few short years, buying a home is the better option. A mortgage can cost less than rental payments in the long run. This is due to the possibility of rent prices rising year after year. A mortgage payment on a house is fixed which is where the discuss of rent vs. buy become muddled.
3. Down payment is the only upfront cost
Even without a down payment, closing costs are required from your selected loan. Closing costs can be up to 6% of the purchase price meaning it’s better to have a chunk of money saved up after deducting the down payment from your expenses. Other costs and fees include taxes, insurance and appraisal. The cost of inspection is also not one to be overlooked. Buyers may think they should skip inspection when they are under a tight deadline to purchase the home with another offer on the table, but this can end up putting a large hole in the buyer's funds. Not all issues with the home are visible and only an inspection can uncover major problems. Don’t sell yourself short when it comes time to finally purchase and put down all the fees necessary to secure a reliable home.
4. School District doesn’t matter if you don’t have kids
Common sense, right? I’m not planning to send any kids off to school soon so why do I need to buy into a good school district?
Resale! Whoever buys your house next will care about the school district if they have kids and this is a make or break situation for some buyers. Also, a good school district can often be an indicator of the type of neighborhood the home is located. Having a nice home in a good school district can even raise the value of your home when you look to sell years down the road. Think of the home as a marketable investment decades down the road, not just within the bounds of your current living situation. This does not mean that buying a home in poor condition located in a great school district is a reasonable situation unless you have the intention of fixing up the property. However, it’s important to balance out the positive and negative aspects of the home’s maintenance, functionality and location. This advice is applicable to more than just school district!
5. The asking price is not negotiated
The list price of a house acts as the starting point for the home’s purchase price. Think of the list price as an opening bid that can fluctuate depending on several scenarios; one of those scenarios being a bad home inspection. Your agent will guide you through the process of negotiating the price based on what the seller is asking, other offers on the table and your financial ability. However, get comfortable with the idea of negotiated prices.
Bonus tip: the process doesn’t have to be stressful. With the right agent, you can be at ease while they use their professional expertise to get the job done.
Comment below any misconceptions you've come across during your buying experiences!