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5 Homebuying Myths and Common Misconceptions

We understand that purchasing a home can be overwhelming, considering the numerous factors involved in this significant decision. Additionally, there is a mix of personal knowledge and external opinions that can influence your thoughts. Many of these opinions come from secondhand sources or so-called "experts" you encounter on TV or the internet. While these opinions may not necessarily be incorrect, they often fail to consider your unique circumstances and the support you have from APM.

Let's explore some prevalent misconceptions and myths associated with the homebuying process. You might discover that these widely accepted "facts" are not necessarily set in stone or even accurate!

Myth #1: You Need an Excellent Credit Score to Buy a Home.

Having a perfect credit score is not a requirement to be eligible for a home loan. Lenders primarily assess your ability to make regular monthly payments without defaulting on the loan when considering your loan application.

While a higher credit score can help you secure a lower interest rate, having a lower credit score doesn't automatically disqualify you from obtaining a loan. If you have a stable employment history, other verified sources of income, or sufficient assets, you can often still qualify for a loan.

Reducing your debt obligations, such as credit card bills, medical bills, car payments, and student loans, can have a positive impact on your credit score as you embark on the homebuying process.

Your Loan Advisor is available to assist you in exploring various options based on your current credit score. They can also provide tips that might help you improve your score.

Myth #2: You Need 20% Down to Buy a Home.

Ah, the longstanding myth about the "20% down payment" in homebuying. Let me assure you, not every loan mandates a 20% down payment. There are various types of home loans, each with their own specific requirements for the down payment amount. Even conventional loans do not necessarily require a 20% down payment. For instance, FHA loans are well-suited for first-time homebuyers and starter homes, as they allow for a down payment as low as 3.5% and have more flexible qualifying criteria.

Moreover, there are programs available that provide assistance with down payments and closing costs. These programs also offer flexibility in terms of income guidelines and acceptable sources of funds. Additionally, there are VA and USDA loans that offer up to 100% financing for eligible borrowers.

While putting 20% down can help you avoid private mortgage insurance (PMI) and lower your monthly payments, it is not an absolute requirement or a magical number to secure a mortgage. This is yet another homebuying myth that can be debunked.

Myth #3: It’s Not a Good Time to Buy.

When it comes to market timing, here's the truth: it's an impossible task. Whether experts claim it's an opportune moment to buy or a bad time to buy, these assessments are highly subjective. Why? Because the homebuying process is heavily influenced by your individual circumstances, and there are always trade-offs to consider. While interest rates may have been lower 18 months ago, home prices were higher at that time.

Fortunately, there are strategies to navigate any housing market. For instance, if current interest rates are higher, you can explore options such as a 3-2-1 buydown or an adjustable rate mortgage to secure a lower rate.

Buying a home is a deeply personal decision. It's crucial not to let external factors sway you too much, as the right time for you to buy may differ from the right time for someone else.

Additionally, it's important to assess your own financial situation to determine if buying is more cost-effective compared to renting. This brings us to another point to consider...

Myth #4: It’s Better to Rent Than to Buy.

One of the significant advantages of purchasing a home is the potential savings compared to renting. In many housing markets, rental prices tend to increase by an average of 8% per year. To put it into perspective, between 2021 and 2022, rental prices rose by over 24% based on data from Credit Karma.

To determine which option would be more beneficial for you in your specific area, you can utilize a rent vs. buy calculator. This tool is valuable in assessing the financial advantages of buying a home. It's worth noting that having a knowledgeable team by your side is another benefit. Real estate agents and Loan Advisors are readily available to assist you in conducting these calculations tailored to your unique situation.

Myth #5: A Pre-Approval Isn’t Necessary.

Obtaining pre-approval before embarking on your home search is crucial. With a pre-approval, you gain clarity on the affordability of homes within your budget.

Having a pre-approval can even make your offer more appealing to sellers compared to other offers. It not only streamlines the home loan process but also strengthens your offer, providing you with a competitive advantage when you come across your ideal home.

We are delighted to assist you in navigating through the various homebuying myths and misconceptions, enabling you to grasp the reality of the homebuying process. Whether you plan to purchase a fixer-upper, a starter home, a second home, or a vacation property, APM is committed to equipping you with accurate information to help you make the best decision for your circumstances.

Contact us and we are very much willing to help.


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