Purchasing a new home is a fantastic opportunity. However, if you are doing it for the first time, it can be a little stressful. On the way, you’ll come across a lot of useful but inaccurate advice, including some common myths about homeownership that seem to stand the test of time despite a lot of evidence to the contrary. Here are some of the most common myths and the truths behind them.
1. Paying Rent is Throwing Money Down the Drain
Short-term rental is sometimes less expensive than short-term ownership. Renting can be less expensive, and you won’t have to worry about maintenance or repairs like you would with a mortgage payment.
However, if you intend to stay in the area for an extended period of time, it is prudent to consider purchasing a home. When a fixed rate is chosen, the homeowner provides stable payments, whereas annual rental amounts increase.
2. You Need 20 Percent Down Payment
Affordability is often a major concern for prospective homebuyers, and this includes determining how much money they have saved for a down payment at home. While a 20 percent down payment may provide benefits such as avoiding private mortgage insurance (PMI) or lowering your monthly mortgage payment, it is not the only option. Other down payments, such as five percent, ten percent or 15 percent, can give you more flexibility when deciding how much you want to pay for your home and may result in less daunting savings before closing.
Before you decide on the down payment you want to make, you can calculate your loan amount in advance, whether you opt for an FHA or conventional loan.
3. Home Ownership Builds Wealth
While it is true that property ownership can help you build wealth over time, other types of investments can provide you with a higher income.
The general public considers homeownership to be a safe investment. Although the value of a home typically rises over time, the risk of purchasing a home remains constant. You risk not only enduring a decrease in property value but also incurring significant unforeseen maintenance or repair costs. A house is a place to live; you should think about the financial implications of buying and owning a home, but don’t think of it as a retirement investment or as a means to build wealth.
If you have to sell your home to fund your retirement, you will still have to pay for a place to live. As a result, you must learn to budget and invest so that your home is not your sole asset.
4. Wait for a Low Interest Rate
Overall, the lowest interest rate mortgage appears to be the obvious choice, but much more must be considered when choosing a time to buy. The loans with the lowest interest rates are frequently adjustable mortgages, which means that the interest rate is not fixed.
Again, it really depends on your situation: how long you expect to own the house, if you expect the house to be paid off quickly, and if you expect your income to increase in the coming years.
It’s important to consider all of the terms surrounding your home purchase, not just the interest rate.
5. All Lenders are the Same
One of the more ridiculous homeownership myths is that all mortgage brokers and borrowers are the same. There are numerous distinctions between mortgage brokers and lenders. To begin with, many buyers are unaware of the distinction between a mortgage broker and a mortgage loan. When purchasing a home, it is critical to select a mortgage company carefully because they are not all the same. Every lender has a unique set of mortgage products, fees, interest rates, and guidelines.
When buying a home, research several different mortgage companies to make sure you get the best hypothecary for your particular condition. An experienced real estate agent will also know why certain mortgage lenders in the past have been used and make recommendations to ensure you work with a reputable business.
Get the Facts
As you prepare to buy a house, you mustn’t fall victim to any of the above homeownership myths. Trusting these ridiculous myths can wreak havoc on the homebuying process.
When you hear something about homeownership that seems a little out of place, consult with an experienced expert or agent. They can assist you in determining whether what you heard is a homebuying myth or a fact.