09 September . 2019
Common First-Time Buyer Myths
For the first-time homeowner, the idea of such a grand purchase can be incredibly daunting and there are several misconceptions about homeownership that keep some on the fence about owning their first house. This is an explanation of some popular misconceptions about owning a home for the first time to disprove easily believed misrepresentations and help reassure the new homeowner.
Myth 1--Renting is cheaper than owning
One of the most popular myths that first-timers buy into is the idea that they can’t afford to own, only to rent a home. However, when comparing the price, owning is cheaper in the long-run than renting as your mortgage rate contributes to building your home’s equity. Renters also have no way to benefit from a home’s appreciation in value and your payments can help to build your credit.
Myth 2--You need outstanding credit and a 20% down payment for a mortgage
Although a few decades ago it was true that you needed to have a minimum 20% down payment for a home in order to obtain a mortgage, these days that has been drastically changed in order to make the homebuying process more attainable and efficient for a larger portion of people throughout the nation. Through the Federal Housing Association, FHA loans can be procured with only a 500-579 credit score and a 10% down payment. With the introduction of government loans to the housing market, lenders have greatly lowered their credit score requirements for mortgages. Although some loans still require a high credit score, some lenders can accept a score as low as 500 for a FHA loan. The options are endless with different lending partners to secure a home for as low as 3% down! Explore your options and find the best lender partner for you. Need recommendations? Visit our builder teams to learn more about their preferred lending partners.
Myth 3-- It’s best, and cheaper, not to utilize a realtor
It is never a bad idea to hire a realtor. RiverLights, and many other housing communities, strongly encourage the use of a realtor in order to help you locate your perfect home and to sort through all of the logistics of real estate contracts. Some first-time buyers go into the purchasing process thinking that if they don’t hire a realtor that they may be getting a 3% discount on their home, as many realtors receive a 3% commission for selling you a home. However, the buyer isn’t responsible for paying the realtor’s fee as it is already factored into the selling price of the home.
Myth 4--Having too many lenders check your credit will hurt your score
Although it’s usually suggested not to over-check your credit as it can damage your score, these rules vary when it comes to comparing loan offers from mortgage companies. FICO is the company that computes the credit scores that lenders use and allows customers to rate shop with multiple credit inquiries for up to 30 days. This helps you, as the consumer, so shop for the best interest rate for you in order to make that big purchase.
Myth 5--Adjustable rate mortgages should be avoided
Most people believe that an adjustable rate mortgage is always a bad idea, but in some cases it may be the best idea. A 5-1 ARM is a loan that allows for the consumer to pay a low rate for the first five years and will adjust annually after the fifth year. This type of loan is great for someone that is planning to pay off their mortgage in five years or anticipates selling their home within five years.
There are plenty of obstacles for the first-time homebuyer, but many of them are a misrepresentations of the buying experience. A new home is a worthwhile investment that can greatly benefit the life of the consumer. Don’t let these myths stand in the way of you and your dream home at RiverLights! Visit our community today to learn more about our builder partners, one of a kind town energy feel, and the opportunity to turn neighbors into lifelong friends!