Buying your first home can be an exciting and stressful time, but with proper planning and knowledge, it can be a worthwhile investment. If you are a first-time buyer, you probably think you understand the purchase process. You may search listings on websites or even hire a real estate agent to show you some properties, but other steps are necessary to ensure you make a smart purchase. With this guide of common myths, you will be better prepared to buy your first home.
You Must Have Perfect Credit
Having excellent credit is beneficial when applying for any type of loan, since lenders will offer you the best terms and interest rates. However, you do not have to have excellent credit to qualify for a mortgage.
A credit score of 740 or higher is considered excellent. Scores between 601 and 660 are considered while 661 to 739 are classified as good. The higher your score, the better your chances of approval at more a more affordable rate. Fortunately, lenders have relaxed the credit requirements, so you do not need perfect credit to be approved for your mortgage.
The Lender with the Lowest Rate Is Best
Numerous lenders will want your business, especially if you have excellent credit, so doing some comparison shopping is smart. Unfortunately, most first-time buyers will sign with the lender that offers the lowest rate out of the group. While this lower rate is a definite pro, it may come with a few cons.
The lower rate may be due to an ARM, or adjustable rate mortgage. This loan will offer you a low rate at the beginning, but the interest rate will eventually increase over the duration of the loan. Not only will you be paying more interest throughout the life of the loan, but your minimum mortgage payments will increase drastically.
When shopping for your mortgage, opt for a fixed loan to lock in the lowest rate possible. Also, make sure your lender is personal and efficient. You will need to work with your lender all through the buying process, so they should be friendly, understanding, and professional.
A low interest rate is great, but other factors should come into play when shopping for your mortgage.
You Need 20 Percent Down
The more you are able to put down on your home, the better, since a large down payment will lower your monthly payment. However, most first-time buyers are not able to put the recommended 20 percent down on a home. Thankfully, 20 percent is not required for most buyers with good credit and income.
First-time buyers are pleasantly surprised to learn that the average down payment is 13.4 percent. The various programs that allow buyers to put a smaller amount down make buying a home financially feasible.
Before you buy your first home, it is important to educate yourself. By debunking these common myths, you will have the tools needed to become a first time homeowner.Share