There are a lot of home buyer myths out there. And if you’re a first-time buyer, it’s easy to get wrapped up in advice that’s, well, just not true.
Everywhere you turn there’s probably a friend or family member telling you about credit scores, down payment amounts, or why you need to buy a fixer-upper. Of course, everyone has their own story about what worked for them, but a lot of times the misconceptions get passed around like a bad rumor.
In this post, we’re going to dispel 10 common home buyer myths to help you with one of your biggest decisions.
Myth #1: You need at least 20% down
Yes, it’s common for lenders to ask for 20% down with a conventional loan. They want to minimize risk should some financial setback occur down the road.
But you can actually buy with 3-5% down. There are even programs available, such as VA, FHA, and USDA, that allow you to buy with no down payment at all. Keep in mind that if you take advantage of one of these programs, lenders see you as a riskier borrower. That means you’ll likely have to tack on mortgage insurance to your monthly payment.
Even if that’s the case, you may be able to buy your first home with significantly less than 20% down.
Myth #2: Real estate agents cost a lot of money
An agent who’s going to be with you through your entire buying experience is probably going to be expensive, right? After all, they pretty much work around the clock to help you find the property that’s just for you.
The reality is, you don’t pay your agent’s commission — the seller does.
Sellers usually factor this into their property’s purchase price. Even then, considering how many hours your agent will work for you, they’re invaluable to you throughout the process.
Real estate agents explain the home buying process upfront so you fully understand the timeline and expenses associated with buying a home. That way you know what is going to happen before it happens.
Myth #3: Don’t call an agent until you’re ready to buy
Real estate agents are ready and waiting to help you find a home. In fact, the earlier you get in touch with an agent, the better. Even if you’re just browsing homes online, having a good agent on your side can help a lot.
You’re probably used to popular home search sites like Zillow or Realtor. Those are great, but your agent can plug you into the Multiple Listing Service (MLS). This is a big benefit for a couple reasons.
First, your agent can set up criteria for properties you’d be interested in. Once a suitable property pops up on the market, you’ll get notified right away.
Second, of all the popular home sites, MLS is the most accurate. That means a lot of times you’ll see properties that other house hunters don’t, especially those who are just looking on their own.
So don’t hesitate to work with an agent. They’ll help you long before you’re ready to buy, and when that time comes, you’ll be better prepared to find your home.
Myth #4: Get a fixer-upper — you’ll save tons of money
You’ve seen the shows where a young couple finds a cheap fixer-upper, puts in a little elbow grease, and suddenly they’ve got a like-new home that’s worth way more.
Yep, that’s the absolute best-case scenario.
What doesn’t make it onto these shows is the home that needs extensive foundation work, or the place that needs new windows and insulation and other unexpected issues.
The point is, you’re not guaranteed to save money by buying a fixer-upper, and many times you end up paying a lot more to fix big or unseen issues.
If you’ve got your heart set on getting a fixer-upper, make sure you know exactly what kind of work needs to be done. Get quotes from contractors so you know whether your budget can handle the repairs and renovations. It’s imperative that you become aware of your available mortgage options and the processes that go along with them.
Myth #5: The down payment is your only upfront cost
This is just plain false. Even though your down payment can be pretty big, you’ll need to spend a bit on other stuff before you actually move in.
You’ll need to pay for a home inspection, which can vary from a few hundred dollars to over $1k depending on the property. Keep in mind that you may have other costs as well such as an appraisal, which can range between $450 and $750.
Pro tip: You might have the option to waive the inspection, but you’re better off getting it done. A good inspection will reveal any major (and costly) issues that need to be addressed. This can save you tens of thousands of dollars.
Closing costs are another expense, which usually range from 2-4% of the purchase price of your home. This will include costs for things like homeowner’s insurance, title fees, and more.
Myth #6: You need great credit to buy a home
If your credit isn’t too great, that doesn’t mean home ownership is out of the equation. There are a lot of loan programs available to qualified buyers with low credit scores. Sometimes these can come with additional fees, but you can still become a homeowner because these loans are designed to accommodate your financial situation.
Myth #7: If you have student loans, you can’t get a mortgage
Lenders look at your debt-to-income ratio when applying for a mortgage. Basically, they want to make sure you can afford to pay your monthly mortgage payment along with any other debts you have. If you have substantial student loans, you might think lenders will see this as a huge red flag and disqualify you from getting a mortgage.
The reality is, they treat student loans just like any other debt. Your best option is to speak with a licensed mortgage officer in our professional network.
Myth #8: You must buy a home at the top of your budget
When you apply for a mortgage, the lender will take a look at your income, debts, assets, credit score, and financial history. They use all this to come up with a maximum loan amount that you qualify for. When they do this, they approve you for the highest amount that they think you can afford. But that doesn’t mean you should borrow that much.
You need to figure out how much you can really afford. You know what your monthly income and expenses are, so use this knowledge along with a mortgage calculator to see what you’re able to comfortably spend.
Give yourself plenty of wiggle room, because you don’t want an unexpected expense to break the bank. Being “house poor”is no fun.
Myth #9: Location is everything
Location, location, location — it’s a real estate mantra that all buyers need to keep in mind. Location is important when considering school districts, commute times, home values, and resale potential, but it’s not the only factor to keep in mind.
For a first-time home buyer like yourself, there are a lot of other things to consider.
Think about how the home will function for your lifestyle. Sure, it might be convenient to live in that one bedroom condo right next to the downtown district. But if you have a family, it might make more sense to spread out in that three-bedroom ranch on a country road. You can change your house but you can’t change your neighbors.
Myth #10: The perfect home is out there…somewhere
Many people think that if they look hard enough, they’ll find a home that checks every box on their wish list.
Sorry to burst your bubble, but this almost never happens.
Compromise goes hand-in-hand with buying a home. Though you likely have a list of must-haves, you’re not going to find a property that has them all. Although, you have to live there, so it’s important to know what you won’t settle for.
Narrow your list to a handful of necessities. For example, if you want more property because you have a family and a few pets who love to be outside, make that one of your must-haves. Cut the luxuries, like heated bathroom floors, quartz kitchen counters, or updated appliances.
When you do this, it opens up your search and also helps your agent find homes that have lots of potential for you. For instance, you may find yourself deciding between a smaller home in a great neighborhood or a larger home in a more affordable one.
Ready for more home buying tips?
Giving out helpful info is one of our favorite things to do, because we want you to be an informed buyer. Whether you’re looking for your first home or your fourth, we’re here to lend a hand with expert advice — because we’re buyers, too.
Make sure you stay in the know. Reach out to one of our experienced Realtors to see how we can help you sort through the facts and buy your first home.