Home ownership will be part of just about everyone’s lives at some point, right? So it’s perfectly natural for you to think, “Hey, I know how this home buying stuff works.” But once they’re out there looking for their dream home, prospective buyers find the process to be a bit more complex than they first realized.
Too many buyers are basing their plans, strategies, and choices around long standing assumptions that turn out to be myths.
We’re here to help. Today we’re debunking 10 of the most common myths homebuyers believe – and sharing the facts instead. Ready? But wait, before you go further, be sure to also check out tips for first time home buyers.
Myth #1: It’s a buyer’s market, so make a lowball offer and it will all work out.
Fact: Well, it’s a little more complicated. If you want to make an offer that’s significantly lower than the asking price, there are several factors that should be in play, including:
- Your offer should still be in tune with prices for similar recently-sold homes in the neighborhood.
- If possible, include a list of comparable sales that justify the offer price.
- The seller should be highly motivated and able to sell at the lower price you’re suggesting.
In addition, the DC, Maryland and Virginia real estate market is very much a sellers market (with no market change in sight). This means that demand outpaces the supply, so be sure to make offers that are competitive.
Myth #2: As a buyer, your real estate agent will get the dirt on any neighborhood, schools, etc., and report back to you.
Fact: You’ll need to go your own homework for most of this. The Fair Housing Act and other ethics rules actually forbid real estate agents from getting too involved in stuff like this.
Myth #3: If a house has been on the market for a while, you’ll get it for a steal.
Fact: Not necessarily. We’ve found that most of the time when you make an offer, all of a sudden another comes to the table from someone else. It’s important to remember you’re probably not the only one who’s been keeping an eye on this home and has decided to throw your hat in the ring.
Myth #4: It’s impossible to love a home and know that it’s “the one” if you haven’t been on many house tours.
Fact: Sometimes, you just know.
It’s absolutely possible to feel sure a home is meant to be yours, even if it’s your very first tour. Of course house hunting is no time to be impulsive and you’ll want to think through the pros and cons logically, but why couldn’t you be one of the lucky ones who finds your dream home quickly? It could happen to you.
Myth #5: No matter what kind of market you’re in, just keep looking and you’ll find the home that meets every requirement on your wishlist.
Fact: Especially in a very competitive market, it’s tough to get 10 out of 10 preferences checked off your wish list.
Of course it’s great to have deal breakers in mind, but it’s also important to prioritize and understand in advance which items on your list are must-haves (like enough rooms to accommodate everyone), and which ones are bonus features (a backyard fire pit).
Myth #6: If you want to buy a home, your credit will need to be flawless.
Fact: Your credit doesn’t have to be perfect, and there are lots of other factors that lenders take into consideration when deciding whether you’ll be approved for a mortgage.
Lenders will take a look at your employment history, debt, and the amount you’re offering as a down payment.
The required credit score also depends on what type of loan you’re getting. Conventional loans have the strictest standards and require a score of at least 620. For an FHA loan, on the other hand, you’ll need a minimum credit score of 580. (Keep in mind that buyers with higher credit scores might be eligible to put down as little as 3.5% of the loan amount with an FHA loan.)
Got a lower credit score? You’re still in the game. With a conventional loan, for instance, the minimum down payment is 5% but could also increase based on your credit score.
Myth #7: A 20% down payment is a must-have.
Fact: That’s old-school thinking. Times are changing, and the median down payment for a first time homebuyer has been just 6% in the past several years.
Why the change? Real estate prices have risen much more quickly than most incomes, particularly in and around large cities like, ahem, DC. Sure you’ll have to pay more each month if you put down less than 20% (not to mention pay PMI insurance), but shelling out less than 20% for your down payment can allow you to put more money into retirement savings and stash funds away for other goals.
Speaking of monthly payments and saving for other purchases…
Myth #8: A 30-year mortgage is always your best option.
Fact: Not so fast – a 15-year mortgage might be a better fit for you.
With a 30-year mortgage, your monthly payments are lower but you’ll pay much more overall – you’re paying to borrow money for twice as long. Depending on how old you are, you also might still have debt later in life than you’d like.
With a 15-year loan your living expenses will be tighter since your monthly payments will be higher. It will feel pretty great to pay it off more quickly, though!
Why not try the best of both worlds? Take out a 30-year mortgage but make extra payments toward principal when you can and get it paid off sooner, saving money in the process.
Myth #9: As a prospective buyer, you’ll have to pay a real estate agent to discuss buying a home and to see properties.
Fact: As a buyer, you should never pay to work with a real estate agent. It’s actually the seller who pays for this.
The real estate agent fee is typically paid by the seller to the listing broker who, in turn, shares part of it with the buyer’s agent. Magical, right?
Myth #10: You’ll probably be fine buying a home without a real estate agent.
Don’t be that buyer. The one without representation. Would you go to court without a lawyer for the biggest case of your life? Probably not.
So don’t pass up the chance to have a seasoned pro by your side throughout this process, helping you sort through the myths and the facts.
And for good measure, Myth #11: If you talk to a real estate company you will be obligated to sign with them.
At ONE Street, our passion is helping REAL PEOPLE make awesome real estate decisions, nothing else. We will never force or obligate anyone to sign with us just because we answer questions & spend some time helping them on their real estate journey. If you feel confused or have any questions about buying a property reach out to us for a no obligation consultation at a time that works within your busy schedule.