5 More Myths Shared by First-Time Homebuyers
Last week, I shared the top five myths shared by first-time homebuyers. This week, I’m following up with five more. As you can see, there are quite a few misconceptions out there regarding the home-buying process, so let’s get right to shattering them, shall we?
Myth #6: Buying a house is as simple as agreeing on a price and signing a few papers.
Buying a home, especially in today’s market, is not an easy task. Even when the market is favorable, I’m careful to advise my clients that it’s not an easy journey. You may be facing a situation where the home you want has multiple buyers vying for it and thus, a bidding war can ensue. Foreclosures are often a lot of work and won’t qualify for financing, while short sales can be a roll of the dice. Whatever your process entails, you want a trusted agent by your side to smooth out the rough bits.
Myth #7: Foreclosures are the best deal.
Foreclosure homes may be priced well below the market, but you get what you pay for. As you start looking at foreclosed homes, begin by adding up the amount of money it would take to repair the home to your standards. Factor in the cost of the time involved, and you may find the savings in the price is a wash. Also, like any other low-priced home, a bidding war can cause a foreclosed home to sell for a good deal above the list price, thereby cutting into your perceived savings.
Myth #8: Getting a mortgage should be quick and easy.
The requirements involved with obtaining a loan continue to get more challenging. It’s not uncommon to have the FICO requirements change last-minute, which can result in a buyer losing the mortgage deal as well. It is very important to work with a quality loan officer who knows their industry and their job, so as to not be imbued with false hope at any point.
The difference between a good loan officer and a poor loan officer could easily mean the difference between obtaining a loan or not doing so. Not to mention, it can be tricky to find the best mortgage product for you. A good loan officer will be extremely comfortable with the mortgage products (read: loans) available on the market.
Myth #9: All mortgages are essentially the same.
Although a 30-year, fixed-rate mortgage is considered standard, mortgages actually vary widely. For example, if you get an amortized loan (common form) today for $250,000 at 5.5% interest and for a term of 30 years, at the end of the 30 years, you will have paid off your home/loan amount and you will have paid $261,010. in interest. That is a lot of money to be gambling with. Change the interest rate to 6% and you’ll pay an additional $28,00 in interest. But that is not the only variable that will determine how much you pay over the life of your loan. Some additional variables include: the type of loan, the loan program, the term (length), pre-payment penalties, mortgage insurance and more. All these variables and more are important to consider when assessing the overall affordability of your potential home.
Myth #10: If something appears on the inspection report, the seller has to fix It.
In a buyer’s market, sellers typically know they will make money at the time the home sells. As a result, asking for repairs is normally not a big deal. Nevertheless, you will want to choose your sticking points carefully.
In a seller’s market, requiring repairs isn’t as easy. If a bank is already losing money on a home (say, through a foreclosure, for example) it may flat-out refuse to do any repairs on the home.
With short sales, the homeowners are already upside-down on the home. So again, there is no money available to be spent on repairs. In such a scenario, what you see is what you get. And sometimes, the house is in bad enough shape the bank won’t loan you money to buy it.
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