6 home buying myths that waste time and money

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You have decided to buy a house. Friends, family, even coworkers and random acquaintances offer their advice. It will not all be true.

They mean well, but what worked for someone else might not be the best option for you. Additionally, there are many widely held myths surrounding buying a home. Falling in love with them can actually make it harder to find the right place.

Here are some of the most common myths and why you shouldn’t believe them.

Myth # 1: You need a 20% deposit

This myth can freeze potential buyers. The median listing price in the United States is $ 385,000. You would need $ 77,000 readily available if you were to make a 20% down payment, an amount that can be intimidating for many people.

“It’s one of the biggest myths out there,” says John Mallett, founder of mortgage broker MainStreet Mortgage. “It keeps more people from entering the market or even seeing if they can qualify.”

In reality, a 20% down payment is more of a guideline than a hard and fast rule. In fact, the average down payment is 12%. For first-time buyers, it goes down to 7%.

Government-backed options, such as FHA loans and USDA loans, can be guaranteed with a drop of only 3.5%. If you are a member of the military or a veteran and you qualify for a VA loan, you can buy a home with 0% down payment.

Conventional loans also don’t require a 20% down payment, but with less money you will usually have to pay for private mortgage insurance. The PMI costs 0.5% to 1% of your loan amount per year and is paid in monthly installments. So if you have the money to pay 20% down payment, it might be a good idea to do so. Having more equity also protects you if home values ​​drop.

You can also apply for a number of grants and home buying assistance programs that can provide money for a down payment. These programs can include grants, forgivable loans, and second mortgages that can provide partial or full down payment assistance. (Brokerage Redfin has compiled a list of down payment assistance programs available nationally and by state.)

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You don’t have the 20% discount? No problem!

With an FHA loan, you can buy your first home with a down payment as low as 3.5%. Click below to see if you qualify today!

To start

Myth # 2: You should definitely get a 30-year fixed rate mortgage

The 30 year fixed rate mortgage is popular for a reason. The fixed rate means predictable payments, while the long payback period means relatively low payments.

However, this is not your only option and it is worth evaluating different types of loans to see which one best suits your needs. In many cases, a 30-year mortgage will be more expensive in the long term.

For example, if you’re more interested in paying off the mortgage faster and can afford higher monthly payments, you might consider a 15-year fixed rate loan.

These loans will generally have lower interest rates than 30-year loans (the average rate for a 15-year mortgage has been below 2.5% since last summer). By paying a lower interest rate for a shorter term, you will save money despite higher monthly payments.

An adjustable rate mortgage can be attractive if you don’t plan on staying in the house for long. Some ARMs will have very low interest rates during the initial fixed rate period, which can save money. However, if you don’t sell or refinance before the rate becomes variable, you could face a much higher rate and monthly payments.