With housing prices steadily climbing and mortgage rates beginning to rise, many people are getting ready to jump into homeownership. But given that this is the single biggest purchase most people will make in a lifetime, make sure you know what you’re getting into. Here are some home buying myths that can lead to trouble.
MYTH #1: A 30-year fixed mortgage is always the best deal.
30 years is best if you plan to keep the home for a long time. But if you only intend to keep the home for a few years, a short-term fixed rate mortgage could be a better choice. The longer you fix the rate, the higher your interest rate will be, so you could be paying a higher rate for nothing.
MYTH #2: You need a 20% down payment.
While putting down 20% is ideal, not everyone can realistically afford that. You can get away with a smaller down payment in exchange for paying PMI (private mortgage insurance) until you have enough equity in the home to have it removed—usually 20%. FHA and VA programs require down payments as low as 3.5% and 0% respectively if you and the property qualify.
MYTH #3: You need impeccable credit to get a mortgage.
Conventional wisdom says that to get the best mortgage rates, you need to have great credit. Conversely, if your credit is bad, you might not qualify for a loan at all. Is there something in-between? Yes. If you want to become a homeowner before you can repair your credit, there are options. The credit guidelines for an FHA loan are more lenient than for most conventional loans. Your credit score can be lower – and you’ll only be required to pay 3.5 percent down.
MYTH #4: Pre-Qualifying is the same as Pre-Approval.
To get pre-qualified, you have to give your lender basic information (assets, income, debts, etc.) so they can determine what kind of loan you can qualify for, and estimate how much you’d be eligible to borrow. But until the lender is ready to give you a loan by verifying the information you provided, you are not actually pre-approved. You still have to complete a mortgage application after your lender evaluates your financial background and credit rating.
MYTH #5: The neighborhood doesn’t matter if you don’t have kids
The neighborhood you choose matters—both now and later when you might consider selling. Even if you don’t have children, good schools are a sign of a good neighborhood. Make sure you check out the area’s walkability, the traffic patterns / activity of the roads, and any other features that would make the neighborhood a good investment.
Established in 1970, AV Homes is a nationally respected builder with a long heritage of innovative designs and unsurpassed craftsmanship. Specializing in both single family homes and 55-plus communities, AV Homes has built and closed over 7,500 homes nationwide. Today, AV Homes is engaged in homebuilding, land development, and other real estate operations in Arizona, Florida, and North Carolina.