11 Common Myths

You’re ready to buy your dream home! Friends, family, coworkers, and even acquaintances have begun offering their advice. Buyer beware, your friends that have bought homes may not be the experts they or you think they are. Chances are you’ve heard some common myths that have persevered despite plenty of evidence to the contrary.

Don’t let these myths stop you from buying a home. I’ll teach you how to debunk them and just how affordable homeownership is!

1. You need to make a 20% down payment.

This is one of the biggest myths out there and often stops buyers from even considering qualifying for a mortgage. Needing 20% down to buy a home used to be a fact, however, times have changed. You can buy a home with as little as 0% down. You don’t have to be a veteran or first time home buyer to take advantage of low down payment amounts. Check with your lender, state and local agencies to see what grants and loans are available to you.

2. You only need the down payment amount.

As a follow up to needing 20% down, it’s important to know you should still have some reserves. The amount of cash you will need will depend on the loan and any grants you may be receiving. Some additional costs may include: closing costs with your lender, taxes, title costs, HOA fees, and home insurance. It is important to talk to your lender to see what these costs might total for you.

3. You need perfect credit to buy a home.

Typically a score of 580 is needed for an FHA loan and a score of 620 for a conventional loan. Chances are if your credit score is below that you may need to work on it just to rent a home. Lenders look at more than just your credit score, your income, savings, and work history can act as a counterbalance to bad credit. Just as a high debt to income ratio can work against you. If you think your credit needs some repair, don’t start paying off old debts! Talk to a lender for guidance with credit repair.

4. You can’t buy a home if you have student loans.

In 2017 and June of 2021 Fannie May (the largest producer of residential mortgages in the U.S.) and the Federal Housing Association, FHA, both made changes to the underwriting process, making it easier for student loan borrowers to qualify for a mortgage. The new policy allows mortgage lenders to use a borrower’s actual monthly student loan payment amount, even if it is below the traditional amount of 1% of the total balance. If a student loan borrower’s calculated payment is $0 (which is possible under an income-driven repayment plan), the mortgage lender will automatically apply 0.5% of the outstanding student loan balance as an assumed payment, rather than 1%.

5. Renting is cheaper than buying.

At the time of purchase this one may be true. However after a few years it is cheaper to buy than rent. When you buy a home you are locked into a mortgage and monthly payment amount. When you rent, prices go up depending on the market. In Dallas rent prices have gone up 20%-30% in 2022 and 2023 As prices rise homeowners also gain equity in their home they can cash out with a new home purchase or refinance. Do some research and you might be surprised by the results of a rent vs buy calculator.

6. All lenders are the same.

It pays to shop around. Rates, fees, and available loan options vary from lender to lender. Some lenders have access to special programs, down payment

assistance options, grants, and much more. The best lender is going to take the time to get to know and take your financial goals and needs into consideration. A good lender will guide you through the process and be available to answer any questions. A bad lender can be the difference between buying or losing your dream home. Ask your realtor for recommendations on lenders they’ve had great success working with!

7. You can save money by choosing not to work with an agent.

Buying a home without an agent sounds like an easy process. Anyone with internet access can search available homes for sale and request an appointment. However, if you forgo working with a Real Estate agent you are more likely to pay more than you would otherwise, even after you deduct commission fees (which are usually paid for by the seller regardless). Look at it this way: real estate agents are pros at evaluating comps and negotiating prices, it's their job. They also have a legal responsibility to get the best deal possible for their clients.

8. Now is a bad time to buy.

Buying a home is both a personal and a financial choice. If your current home is no longer suiting your needs and you’re ready to buy, then don’t let market conditions dissuade you from your goals. Every market has advantages that a buyer can utilize to purchase a home. 2021 during times of low inventory and rising home prices, buyers could utilize low interest rates to purchase a home. 2022 during a time of high interest rates and slower purchase activity, buyer could utilize seller paid concessions towards their closing cost or buying down their interest rate.

9. You need to find your dream home before applying for a mortgage.

Everyone browses the internet for homes, it’s fun. You want to have something in mind before you sit down with a Realtor. Even if you think you are just browsing you are setting yourself up for disappointment before you have even started the process. That home that you just fell in love with will be sold before you can finish the pre-approval process. Did you know, most buyers browse for homes that are higher or lower than what they are actually qualified for? This makes buyers either discouraged, or setting high expectations that can’t be met. Your home search should always begin with finding out what you can afford and the financing options available to you.

10. You should start by writing a low offer.

Don't insult the seller with a lowball offer just because you think the seller is setting the price high for negotiation. Sellers can simply decline or ignore your offer. If the house is perfect for you, don’t risk losing it! Your real estate agent is the expert in

local market conditions. They can help you write the best offer to make sure you don’t lose your dream home and get the best deal possible.

11. You don’t need a home inspection.

This one is technically true, however this is the biggest financial decision of your life. A home inspection uncovers all issues or needed repairs with the home. A lot of which are not visible or the seller may not be aware of. Even if the home is listed “as is”, you still have a right to a home inspection to decide if you want to move forward or not. Forgoing an inspection can be a really costly mistake. This is your opportunity to ask the seller to take care of repairs or back out of the contract if they are too costly.

When thinking about buying a home it is important to know all of your options and take advantage of them. Another great fact to know is that you can talk to a lender or Realtor at any time about buying a home, whether you plan on buying soon or in a couple of years. A lender will not need to pull your credit to give advice. You also don’t need to be ready to buy a home to talk to a Realtor about the process or the local real estate market!