You may hear all kinds of conflicting advice from friends, neighbors, and relatives. If you do your research, you can get a better understanding of what is actually involved in the home-buying process. Here are the truths about four common home-buying myths:
- You need to have perfect credit.
Many people assume you must have a high credit score in order to secure a mortgage. That simply isn't true. If you have less than perfect credit, lenders are often willing to work with you to get a mortgage. Although it's not the only thing lenders look at when considering you for a loan, your credit score will have an impact on the interest rate, so make sure you review your credit report before applying. If you find any errors, report them to the credit reporting bureaus ASAP. Once they're removed, you can apply for your mortgage.
- You need 20 percent down.
One of the most common misconceptions about the home-buying process is that you have to pay 20 percent of the purchase price for the down payment. Since this can be a large chunk of change, many people think owning a home is out of their reach. However, there are many first-time home-buyer programs that allow buyers to put down a lower down payment. For those who qualify for a Federal Housing Administration loan, your down payment can be as low as 3.5 percent. FHA loans also feature low closing costs and easy credit qualifying. Active or retired members of the military can apply for a Veterans Administration home loan, which requires no down payment for qualified borrowers.
- A 15-year fixed-rate mortgage is your best option.
Many people opt for a 30-year fixed-rate mortgage because they offer lower monthly payments than a 15-year fixed-rate loan. If you can afford to pay more on a monthly basis, you may want to consider a 15-year mortgage. With the 30-year option, you will most likely end up paying more during the term of the loan. It's also smart to keep an open mind about adjustable-rate mortgages. If you don't plan on staying in your home for the long haul, it could save you money if mortgage rates are low at the time you buy your house.
- You don't need an agent.
While it may seem like a no-brainer, the home-buying process can be complicated and wrought with pitfalls. Buying a home is probably one of the largest purchases you will make in your life, so you want to do it right. An experienced real estate agent or REALTOR® who knows the ins and outs of the market and the features of a specific real estate area can make the process run more smoothly. Real estate agents often have local connections with other REALTORS®, insurance agents, appraisers and lenders who can help make the home-buying process easier. Before you know it, you'll be the proud owner of a new home.
Don't believe everything you hear. Sometimes the "truth" couldn't be more wrong!