You’ve considered buying a home or you’ve started the process of purchasing property. In either scenario, you’ll come across a few misguided conceptions about buying a home. In rare instances, these assumptions can sway a buyer’s decision, so be sure to steer clear of the following myths:
1. Buying is Always Better Than Renting
You’ll hear older generations say Millennials and even Gen Xers are wasting their money on rent when they could’ve been putting it toward a home. Yet, as we detailed in a previous blog, the costs of a home go beyond the mortgage to:
- Insurance costs
- Much bigger home improvements
- Property taxes
Experts advise that if you can’t budget all of these expenses and still have money left over for savings, renting remains the more financially sound choice.
2. Real Estate is a Solid Growth Investment
This used to be true, but the housing crash essentially decimated this notion, putting many homeowners underwater with their mortgages. In a positive scenario, you end up breaking even, as far as value is concerned.
Rather, attitudes toward home-buying have shifted over the past decade. Homeownership is less of a financial investment and more of a move toward having a property for decades into the future. As a result, “starter homes” are becoming less popular, as first-time buyers opt for property that they’ll continue to live in for the next several decades.
3. Look for the Lowest Interest Rates
This isn’t to say that low interest is inherently bad. Rather, while market rates shift up and down, buyers can get caught in one of two traps:
- They get sucked into an adjustable-rate mortgage because of its lower-than-average teaser rates. Later, they get stuck with a growing payment that’s no longer affordable.
- They chase the market and pass up perfectly good home-buying opportunities in the process.
4. You Need a 20% Down-Payment
This factor continues to be a constant for many conventional loans. Yet, these types of loan programs aren’t the only financing options out there. More and more buyers find themselves eligible for FHA, VA and USDA programs. Out of these options, you may only have to pay a three-percent down-payment on an FHA loan, if you have good credit, and VA loans offer no-down-payment, low-cost financing for veterans and their spouses.
5. Your Income Determines Your Mortgage
Although this is partially true, lenders care more about your debt-to-income ratio. Ideally, your mortgage payment should be under 40 percent of your monthly take-home income. As a result, you could be bringing in a bunch of cash per month, only to be turned away or redirected to a smaller loan if your expenses eat up too much of your income.
When you’re thinking about purchasing property, consider a custom-built home through By Carrier. To learn more about our communities, contact us today.