I hear this all the time from potential buyers. “We’ve been looking for several years but… “ This typically is followed by “we’re saving for a down payment”, “we’re about to have a baby and can’t afford a home at this time”, “we want to pay off out debt before purchasing a home”, “we have bad credit.” If you’ve said these things and are still thinking, and searching, for a home. Stop!
Unless you actually know you will reach whatever goal you’re trying to obtain by having an actual plan to obtain the qualifications you’ve set, with a deadline date and a penalty for not making the goal, you’re not actually trying to obtain the goal. Whatever the goal is. Below are 6 myth busters to owing a home.
- You can buy a home with much less down than you think. Did you know that most buyers only put 3% down to purchase a home? Most lenders don’t require 10% or even 20% down. If you’re financing with an FHA mortgage 3.5% down payment of the purchase price is all that’s needed. If you’re eligible for a VA loan, you may be able to put NOTHING down. If you’re looking outside of Travis County the USDA has down payment programs which require no repayment.
- You may be able to find a seller who is willing to assist with closing costs. Granted, in our current Austin market, this may be hard to find. But, with the fall season coming up, the home market typically slows down the closer you get to the holiday season. It’s a great time to look for a home. The homes still on the market are serious sellers. They want their home sold. Currently in Austin, the average market time for a home under $400K is approximately 10 days if priced at the current average market price comparable to recent sold home in that neighborhood. During the holidays, the average market time is over 30 days. This means, sellers may be more willing to assist with down payment, closing costs or pre-paid expenses. Check with your lender to see what your loan programs allows for maximum assistance.
- You may be able to obtain a cash down payment without going into debt. Did you know that most loan programs allow down payment assistance from gifts or grants? Sellers, family members and even government down payment assistant programs such as SETH are all allowable programs for down payment that do not have to be paid back. Check with your lender about these programs to see which is available for your loan type.
- You can buy a home even if you have credit problems. Myth: I have to have “perfect” credit score in order to qualify for a loan. This myth is false. Did you know, depending on the lender, you could have a credit score as low as 580 and still qualify for a loan? Don’t have perfect credit. That’s okay. If you have not spoken with a lender to be pre-qualified, how do you know you won’t qualify? Your credit may be better than you expected.
- You don’t have to be debt free to finance a home. Sure, most people want to be debt free. News flash-- if you’re financing a home, you will not be debt free. A home purchase is THE most expensive investment you’ll purchase. 80% of all people, including millionaires, finance their home. Why? Savvy investors know that using other people’s money frees up their own money so they can invest in other things that make them more money. Unless you’re the heir to a grand estate or trust, getting ready to retire or have a fixed income which you know will never change, you’re most likely going to need a loan to purchase a home. Having a child so you can’t afford to purchase a home right now? I hear this a lot. Guess what, once the baby comes, you’re going to be spending over a million dollars to raise that child and even more if you’re planning on paying for the cost of a college degree. One great reason to purchase a home now is that a home is an investment. If you don’t take equity out, continue to pay the mortgage, you’re going to have a nice nest egg over a 20 year period and all you had to do to get it was not pay rent!
- You can, and should, get pre-approved for a home loan before shopping for a home. 90% of all home buyers start looking before know how much they can afford. If you’ve used an online calculator to see how much you can “afford”, check to see if the calculator added in taxes and insurance premiums. Most do not. If it did ask for you to enter an amount, how much did you allot for these expenses? Have you call an insurance company to find out how much home insurance will cost for the type of home you’re going to purchase? Call and find out as rates will vary depending on coverage and insurance company. Property taxes. This is any one’s guess. There doesn’t seem to be a definitive way to approximate how much your taxes will be. You can’t merely go by the current tax rate as it may be significantly different once the County reassesses your taxes. Find an average tax amount for the neighborhood you’re thinking of purchasing in as this may give you a better idea how much you taxes will actually be.
Becoming a homeowner doesn’t have to be a circus trick, jumping through hoops, and hoping someone will say Alacazam in hopes to obtain a mortgage. Finding the right team to hire is key. Find a lender whom you’re going to like and work with them to obtain pre-qualification. Once you know how much you’re qualified for, start looking at areas you’d like to live in and see if it’s an area you can afford. You may end up needing to find a neighboring community to fit your budget. Next, interview and find a Buyer’s Agent you’d like to work with and hire to assist you in finding the right home. You’ll be spending at least 30-45 days with them, working closely through certain aspects of the transaction: finding your home and from contract to close.