Buying a home is one of the biggest financial decisions and commitments many will make. Unfortunately, there are several outdated and false ideas surrounding the home buying process and what exactly is needed to qualify for, and purchase a home in 2020. In this list, we are breaking down five of the most common home buying myths.
1) 20% Down
If you have ever considered buying a home in the past, one of the first things you may have heard is the need for a 20% down payment. Times have changed! Some loans, such as an FHA loan, now require as little as 3.5% down. Customers applying for through the VA loan may require little to no down payment at all. There are even conventional loans that require only 3% down! There are disadvantages of putting a smaller down-payment on your home, such as potentially higher monthly mortgage payments and more interest paid on the loan over the term of the loan. On the other hand, this means that the savings period before buying a home may be shorter than many people think. Talk with your Benchmark Mortgage loan officer to see what your down payment options are, and see what works best for your situation.
2) Excellent Credit
Many people just assume that you need a stellar credit score to qualify for a home loan, but this is also false. If you have a low credit score, some lenders will look at bill payment and rent history. While a higher credit score could mean a lower interest rate, a less stellar score does not necessarily exclude you from getting a mortgage. This will vary from lender to lender, but going to a lender like Benchmark who will consider your unique situation and work with you on credit repair or seek alternative payment history sources is always a good idea.
3) Lowest Interest Rate
When starting the search for a home, the first thing most potential homebuyers look at first is the interest rate a lender can provide them. While the interest rate is an important factor when choosing a lender, it shouldn’t be the only thing that goes into choosing who you get your mortgage from. At Benchmark, we take “total payment” and your long-term financial outlook to heart, far beyond the scope of the interest rate alone. If a lender is offering an Adjustable Rate Mortgage(A.R.M.) at a very low initial interest rate, be warned that interest rate could potentially rise as the market fluctuates throughout the term of the loan. Be aware also, that if a lender is giving you an extremely low rate, it could mean higher up-front fees, or fees that will be factored into your closing costs. This brings us to our next home buying myth.
4) Closing Costs
Most people buying a home for the first time forget to factor in the closing costs of your home. This is an additional cost on top of your down-payment. These costs usually cover your home inspection, appraisal, application and origination fees. There are some exceptions to when you’ll have to pay the closing costs such as the seller agrees to pay, this is rare but can be negotiated depending on the situation. Talk to your loan officer during your loan process and assess the how much will be due at closing to avoid any surprises!
5) Student Loan Debt
This is another big-time home buying myth. Simply having student loan debt will not prevent you from qualifying. Most often, lenders want to see a consistent payment history on the loans in question. If you have been consistent, and/or are on a payment plan, that could increase your chances of qualifying for a loan. Understanding your debt-to-income standing is also key to knowing if you’re ready for home ownership or not. So before completely writing off the possibility of homeownership because you have student loans, consult a Benchmark mortgage specialist, and assess your eligibility. If you’ve been consistent on payments and have a decent debt-to-income ratio, you may be surprised at what you could qualify for.
Ready to get started?
If you want to explore whether you’re ready to buy a home, get in touch with a Benchmark Loan Officer to learn more about your financing options.we would be happy to answer any questions. If you are ready to get started, you can start your application now, or contact us today!you can call me, contact me, or if you are ready, you can apply now! It would be my honor to help you plan your financial goals.
Benchmark brings you home.