Here is a list of truths behind the most common misconceptions about purchasing a home. In a recent article, Lew Sichelman, a seasoned writer for Inman who has 50 years of experience writing about housing and mortgages, reported that 38% of renters plan to buy a home in the next two years but myths about costs are holding them back. Here is a list of three common misconceptions about purchasing a home and the truths behind them.
Myth #1: You need flawless credit.
Truth: Some loan programs such as FHA have more flexible lending standards, qualifying buyers with lower credit scores. You can check the accuracy of your credit history for free once a year.
Myth #2: You need a 20% down payment on a home.
Truth: A 20% down payment has its perks which may include smaller monthly mortgage payments, less money spent on interest, and being able to avoid private mortgage insurance which typically costs between .5 and 1% of the entire loan amount per year according to Investopedia.com. However, there are government and some private programs such as FHA and VA loans that accept 0 to 3.5% down if you and the property qualify.
To put it in perspective, let’s say you wanted to purchase a decent starter home in Oconomowoc for $160,000. A 20% down payment would be $32,000 versus a 3.5% down payment of $5,600. Keep in mind that most loan programs that accept down payments less than 20% also require private mortgage insurance. The insurance premiums vary based on factors such as the loan amount and terms, and can be removed down the road when there is enough equity in the home.
Myth #3: Most asking prices on homes are firm.
Truth: Sellers often are more willing to negotiate the price of the home instead of waiting for a higher offer for a number of reasons. These motives could include the urgency they need to sell, if a prospect is already pre-approved for financing, and if they receive an offer that excludes the contingency of selling a different property. When the likelihood of getting to a successful closing is strong, there is a greater probability that sellers would negotiate on the price.
Information contained in this blog were gathered from reliable sources and believed to be accurate and reliable but is not guaranteed and is subject to change without notice.
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