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Buying a home is often paired with stress, anxiety, and uncertainty. There are many common questions that home buyers have before they begin their house hunt, during their house hunt, and after they’ve found their dream home. Unfortunately there is lots of bad information and advice available to home buyers whether it’s via the internet or from friends, family members, or colleagues.
There are lots of common home buying misconceptions out there. Many of which can deter a potential home buyer from deciding to actually attempt to buy a home. These common home buying misconceptions also can create problems for a buyer throughout the home buying process as well as afterwards. It’s important that potential home buyers avoid believing these common home buying misconceptions at all costs!
What are the most common home buying misconceptions? Below you will find the top 10 home buying misconceptions. These home buying misconceptions are extremely common and it should be known that they are not the reality and not believed!
To Buy A Home I Need Lots Of Money To Put Down
A common home buying misconception is the belief that when buying a home, a large amount of money is required to be put towards a down payment. The most popular percentage that people believe is required for a down payment is 20%. There are actually many ways that a home buyer can buy a home with little to no money down.
One of the most popular ways to buy a home with very little money down is a FHA, Federal Housing Administration, and mortgage. A FHA mortgage allows a buyer to put as little as 3.5% down towards a home. Obviously 3.5% down is much different than believing you need to have 20% down to buy a home.
To Buy A Home All I Need Is The Down Payment
Even though a large amount of money is not required for a down payment on a home, another home buying misconception is the belief that the only money needed to buy a home is the down payment. This is incorrect.
There are many costs that are associated with buying a home, many of which you may not be familiar with. Some of the costs that you can expect when buying a home include;
Various inspection fees (ex; home inspection, radon test, septic inspection, etc…)
The above costs are just some of the more common fees associated with buying a home. There are many nationwide, statewide, and local home buyer programs and grants available for home buyers to help cover the other costs of purchasing a home. Don’t fall for the common home buying misconception that the only money required to buy a home is the down payment, because it is incorrect.
To Buy A Home I Need To Have Perfect Credit
First and foremost, credit scores do have an impact on whether a buyer is able to buy a home or not. There is a common home buying misconception however that you need to have a “perfect” credit score to buy a home. There are several mortgage products available for home buyers that allow credit scores in the 620’s.
It’s important to understand that while you don’t need to have perfect credit to buy a home, having a lower credit score will impact a mortgage. The biggest impact a lower credit score will have is the interest rate a buyer is able to secure. The lower the credit score, the higher the risk for the lender, therefore the higher the interest rate.
Since mortgage rates are currently hovering at historic lows, there is a good chance that a buyer with a lower credit score is getting a better interest rate than a buyer who bought a home 10 years ago with perfect credit.
I Need To Find A Home Before Talking With A Bank Or Mortgage Company
One of the biggest home buying misconceptions that exists is the belief that finding a home before speaking with a mortgage company or bank is the correct order when buying a home. It’s critical when buying a home, you discuss your financing options before looking at homes and get a mortgage pre-approval for many reasons.
Why is having a mortgage pre-approval important before looking at homes?
The number one reason to have a mortgage pre-approval before looking at homes is because a seller will require proof prior to accepting a purchase offer. Depending on your local real estate market, not having a mortgage pre-approval can put you at a huge disadvantage if your real estate market is a sellers’ market. Buying a home in a sellers’ market often means you will face competition from other buyers and not having a pre-approval is a great way to lose out on your dream home.
Other popular reasons to discuss your financing options with a bank or mortgage company before looking at homes include;
Understanding the costs associated with buying a home
Know that you are looking at homes that are within your comfortable budget
Make sure you’re getting the best interest rate and mortgage product
To Buy A Home It’s Not Important To Have A Real Estate Agent
Another popular home buying misconception is that when buying a home, it’s not important to have a real estate agent. It is possible to buy a home without the assistance of a real estate agent, but why would you do such a thing?
First it’s important to understand that in the majority of situations, a buyer will not be responsible for paying their real estate agent. Having a top-notch buyer’s agent when buying a home can make the process much easier and less stressful than not having a buyer’s agent.
It’s strongly recommended when deciding on a buyer’s agent that you know how to properly interview prospective buyer’s agents. Also make sure you don’t select the first agent you speak with because they are your colleague’s brother or sister. Having a top-notch buyer’s agent can not only make the home buying process less stressful but also can give an advantage in a competitive seller’s market.
Any Home I Buy Will Be Worth More Money In Future Years
It’s always difficult for a seller to hear from a real estate professional that the home they bought a few years ago has not increased in value. A common home buying misconception is that any home that is bought will be worth more money in future years.
Every home is unique and has its own features, amenities, location, and desirability. It’s possible when purchasing a home that a buyer is paying top market value for the property in a market that does not see lots of appreciation in home values. If this same buyer is attempting to sell in a couple of years, it’s possible their home value may have remained the same or even decreased.
It’s important when purchasing a home that a buyer knows how to pick the neighborhood they are looking to buy in, but also has an understanding for the local real estate market. If a buyer does not do their research, it’s possible they maybe disappointed when they find out their home has decreased in value.
Online Home Valuation Estimates Are Accurate
Another common home buying misconception is that online home value estimates are correct. There is nothing more frustrating for a seller to receive a low ball offer on their home because a home value estimate was much lower than the listing price for their home.
There are many online websites that offer home buying tools for home buyers that are quality and useful. One tool that is not helpful for home buyers are these online home value estimates. In most cases online home value estimates are inaccurate.
One of the most popular websites that provides home value estimates is Zillow. During a recent case study of home sale prices versus Zillow’s “Zestimates” showed that almost 40% of the sale prices on a given day were $18,000 or more off of what the “Zestimate” called for.
It’s Not A Good Time To Buy A Home
Many home buyers believe the misconception that now is not a good time to buy a home. In reality there are many reasons why buying a home now is actually a very good idea.
The most important reason why now is a great time to be buying a home is due to the historically low interest rates. If interest rates were to increase as little as 1%, the number of home buyers who were able to buy a home would decrease significantly. Other popular reasons to buy a home now and not believe this common home buying misconception include;
Property values are expected to increase
Cost of renting is increasing
Buying A Home Is A Quick & Easy Process
Buying a home can present many hurdles and pitfalls that need to be overcome throughout the process, therefore buying a home is not always a quick and easy process. The majority of homes will take roughly 60 days from contract date to closing date, depending on many factors.
The home buying process itself has many moving parts and several different parties involved. Some of the most common reasons why the home buying process is not a quick and easy process include;
Title related issues
Instrument survey related issues
Low home appraisal issues
Coordination of closing date with buyer, seller, and attorneys
I Should Start Low With A Purchase Offer To Leave Room For Negotiation
Many home buyers believe that their initial purchase offer should be much lower than the homes asking price. This is a very common home buying misconception and can often lead to an irate seller. There are certainly cases when a buyer is correct in offering a very low offer.
Knowing exactly how much a buyer should offer for a home is not easy. There are many tips that buyers should be aware of though when deciding how much to offer a seller for their home. It’s important that when deciding how much to offer for a home, you have done your research and homework before making that initial offer, as it maybe your only opportunity.
Believing the above home buying misconceptions can be harmful to a home buyer. Whether these home buying misconceptions lead to a buyer not pursuing a home or it leads to an unsuccessful home buying experience, it’s important you’re aware of these misconceptions.