When buying a first home, most people are making one of the biggest purchases of their lives. Without home buying experience, it’s hard to separate fact from fiction. To help first-time buyers in Keller, the following list will separate myth from reality.
Myth: It takes a 20 percent down payment to buy a home.
Reality: Required down payment amounts vary by type of loan and they are on average much smaller than people think. Last year, the median down payment for all first-time buyers was 6 percent, according to the National Association of Realtors. One reason is that many first-time buyers use FHA loans, which require down payments as low as 3 to 3.5 percent. VA loans require nothing down for qualified veterans or active military personnel. If you want to take out a conventional loan, many lenders do require 20 percent down, but you can lower that percentage with private mortgage insurance. There are also hundreds of down payment assistance programs that eliminate or reduce down payment requirements for qualified borrowers.
Myth: If you owe a lot of student loan debt, there is no way you can get a mortgage.
Reality: Don’t assume that having a lot of student loan debt automatically disqualifies you from getting a mortgage. The key factor is not necessarily the size of your loan obligation, but the amount of your total monthly debt payments compared to your monthly income. This is called DTI. Many first-time buyers with monthly student loan payments were as high as $300 have been approved, and many more could qualify by increasing their monthly income.
Myth: If your credit score is low, you should not even try to get a mortgage.
Reality: Millions of potential buyers assume they will not be approved for a mortgage even though many could qualify, according to a national survey. Today, median FICO scores for mortgages to buy a home are 683 for FHA loans and 754 for conventional loans. But hundreds of thousands of buyers with scores lower than those are getting mortgages if they have good income and low levels of debt.
Myth: Buying a home isn’t a good investment.
Reality: Real estate, like other assets, rises and falls based on supply and demand. In 2014 North Texas had a record number of home sales including a particularly busy December.
Myth: I’m about to get married and the wedding is so expensive I won’t be able to buy a home.
Reality: According to surveys, the average wedding has 138 guests who typically give a gift valued at $100 each. That’s $13,800 in spatulas, baking pans and other things. If every guest contributed to a Down Payment Fund, you could have more than enough saved for a down payment on a new home.
These are just a few of the myths about home buying that surface frequently. Potential buyers in Keller, especially first-time buyers, should eventually speak to a local loan officer to further discuss specific questions about financing a home. We are here to help.
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