Home Buying Myths vs. Facts
Knowing the truth - You'll be surprised
After the real estate industry bubble burst in 2009 and many home owners were left “upside down” (owing more than your home is worth), home buyers coming into the market became extremely wary, if not down right fearful of the idea of buying a home, and with good reason. They have become understandably wary of home-ownership and think that the expectation to gain real estate in one’s 20s or 30s is a thing of the past. While it’s true that buying your first home is something to be taken seriously, there are many things that the younger generation takes for granted. Owning a home takes effort, time, and budgeting, but it’s not impossible. We’re exploring what first-time home-buyers should know, including the top myths versus facts of home-ownership.
What First-Time Home-Buyers Should Know
|“Only people who make a lot of money can afford a house these days.”||Do you and your spouse make more than $25,000/year?
You can likely afford a $110,000 mortgage. The important factor is your debt-to-income (DTI) ratio. If you don’t have much other debt, such as credit card debt, you’ll have a better DTI percentage — 36% or below is considered OK.
|“I don’t have a perfect credit score, so I can’t get a house.”||The FHA minimum credit score for subprime mortgages is 580.
While you may be stuck with a higher interest rate, it’s still possible to get a mortgage at 580.
|“If I buy with a bad credit score, I’ll be stuck with bad interest rates for 30 years.”||You’ll be able to adjust it.
You can always refinance, modify, or reset, and it’s a good idea: A 3.3% to 5% change in your interest rate could lead to $129 less in payments each month.
|“Single people never own houses by themselves.”||Sixty percent of first-time home-buyers are unmarried.|
|“Homes are just too expensive.”||The average home is $140,327.58.
It’s still a buyer’s market. You can also find cheap foreclosures starting as low as $25,000.
|“I’m too old. It’s too late for me to buy a home.”||The average age of a first-time home-buyer is 32.5 years old.
On average, home-buyers rent for six years before buying.
|“It’s impossible to save enough for a 20% down payment.”||You don’t necessarily need a 20% down payment.
FHA loans ask for as little as 3.5%. On a $110,000 home, that’s only $3,850 — that’s about as much as a down payment on a car!
|“It’s cheaper to rent.”||It depends, but the average monthly mortgage payment is $882.
Unless you’re in certain markets, it’s still the case that each square foot is cheaper when you buy versus rent.
|“It’s not a good investment anymore.”||Roughly 27% of Americans say real estate is the best type of investment for money you won’t need for more than 10 years.
Houses typically last more than one generation, so you’ll also be investing in your family’s future.
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