We often believe rumors, unverified sources, and common myths. Especially when it comes to buying real estate. But, these myths can prevent us from making an important decision about buying our dream home. We often believe rumors, unverified sources, and common myths. Especially when it comes to buying real estate. But, these myths can prevent us from making an important decision about buying our dream home. A large deposit, the inability to get a mortgage, and pre-approval — I am certain that I do not require it. This article analyzes the main myths about buying a home in the USA. So, everything you heard about but were afraid to ask.
Common myths about buying a home in the US
Down payment of 20%
Surely, you have heard that you cannot buy a house without a down payment of 20% or even more. Fortunately, this is not the case!
Many options are available to help you buy a home with a lower down payment.
Here are some of the most common alternatives:
- FHA loans with a 3.5% down payment
- VA loans sometimes require no down payment at all
- Conventional loans by 3%
If a 20% down payment exists, this does not mean that you need to save up and limit yourself in everything. Maybe it’s not your way.
Of course, the initial payment has its advantages:
- Lower mortgage payments
- Lower mortgage interest
Usually, if you invest less, you must pay private mortgage insurance. This is from 0.50% to 2.25% of the original loan amount. But now you know that you have the opportunity to choose from different options and evaluate the feasibility of each of them!
Prequalified is better than pre-approval
No, and no again. Being prequalified does not help you buy a house! As opposed to pre-approved.
Prequalified shows that the lender has assessed your loan — but that does not mean you will receive the money.
Pre-approval is the most effective way to save on your mortgage. In it, the lender shows that everything is ready and you can buy.
The main purchase cost is the mortgage
Ah, if only it were that easy! You will need to pay many additional fees to complete the transaction. Most often, it is 2-5% of the mortgage amount.
Of course, these fees can be included in the total loan amount. But then your debt will increase, and you will have to pay more interest. To get the best deal on closing costs, it is better to pay them in cash.
The main expenses are mortgage payments
Often, first-time homebuyers think that mortgage payments are their main expense. But besides this, there are a large number of different costs.
For example, these include property taxes, homeowners insurance, repairs, and home maintenance. Therefore, preparing in advance and rationing your budget more carefully is better.
A low starting interest rate is always good
Something could go wrong here. Remember that your mortgage decision should not be based solely on the interest rate.
For example, adjustable rate mortgages (ARM) are attractive because of their low starting rates. But, they tend to change periodically. When this happens, your rate may suddenly rise and increase your payments. It would be best if you were prepared for such spontaneous changes.
An adjustable interest rate is usually chosen by people who understand the risks and are willing to manage them. One option for an adjustable interest rate is to buy a house and then refinance it. But, if you are not ready for such financial things, choosing peace of mind with a fixed interest rate is better. It will likely be higher, but your payment will remain unchanged for the entire loan term.
You don’t need an agent
Such confidence can play a cruel joke on you. After all, an agent is a person who will shorten your time looking for a home and even help resolve issues with a mortgage. In addition, its services are usually free — because the seller pays a commission.
Pay attention to an important point — the listing agent can work against you. They have obligations to the house’s seller, which is why this is the case. That is, legally, they protect the seller, not the buyer.
The buyer’s agent is always on your side! Therefore, there will be no conflict of interest here because they represent the seller.
You do not need to look for a mortgage
Always look for the best deals, ask questions, and read about different mortgage programs. This will help you save money and make a better purchase. Compare offers from various lenders and never make a decision quickly.
If you want the process to be as easy and painless as possible, seek the help of a mortgage broker.
This person will be with you from the beginning to the closing transaction. And also, he will be able to answer all questions, dispel myths and help make the right choice. Sign up for a consultation at LBC Mortgage to start your journey to buying your dream home!