So, you’re ready to buy a home. Wait! Before you jump in read the truth about these 10 common myths, so you can be more competitive in the buying market!

Myth #1: A home is a great investment.

We’ve all heard this statement, and perhaps at one time it was true. However, home prices have actually fallen by 33% since 2006, according to the S&P Case-Shiller Home Price Index.

If you really want to make an investment, your money is better off in stocks. By actually sitting down and cranking out the math, Blogger J.D. Roth showed that since 1962, the money invested in owning a home returned at 1% above inflation, while the return on stocks was 7%.

Don’t worry; it’s not all bad news here. If you have a home and a fixed mortgage rate, inflation isn’t going to increase your payments. Another way to use your home as an investment, rent it out!

Myth #2: Remodeling is a great investment.

This is often just not the case. Though it depends on which projects you choose, you will most likely not see much, if any, return on this investment. Since there are so many projects that must be done for the general upkeep on a home, they often do not do anything to improve the value of it.

For instance, according to Remodeling.net, a new roof pays back about 67% of its cost when the home is resold. The remodeling projects with the best return are converting an attic or basement into living space, and minor kitchen or deck remodels. The projects with the lowest return are sunrooms and complete kitchen remodels. So before you go out and spend time and money on that remodel, make sure it’s going to be worth it.

Myth #3: A fixed mortgage rate is always better than an adjustable rate.

When you’ve found your dream home, the one you’ll be living in for the rest of your life, then most likely, a fixed mortgage rate is the one for you. You will pay more, but it will be worth it in the long run. Fixed mortgage rates offer security because they do not rise with inflation.  Your payments will be the same every month, so you can budget accordingly.

However, many homebuyers are not planning to live out their days in the home that they currently have their eye on. Adjustable Rate Mortgages (ARM) offer lower rates and payments toward the beginning of the loan, making them much more attractive, especially in the case that you are not planning to stick around for more than 5-7 years.

Myth #4: Choose the lender who offers the lowest fees.

When it comes to choosing the right lender, the one with the lowest fees might seem appealing, at first. Stop and think first, there are a lot of other qualities that a lender should have that may just get you that home over your competition. Your lender should be reliable. If you can’t reach them at the moment of truth, you may just lose out on your dream home.

Does your lender have a good reputation? Most lenders have reviews, like Zillow’s lender reviews, that you can check out before you make your decision. Remember, the way they work with their clients is most likely the way they will work with you too.

How well does your lender work with your real estate agent? These two need to be able to be a team and work together to get you what you want.

Myth #5: Your down payment must be 20%.

Yes, it’s true that the ideal down payment is 20%. However, that is just not realistic for everyone. So while you will be required to pay private mortgage insurance (PMI) for anything less than a 20% down payment, there are also benefits to having a smaller down payment as well.

• If you are required to carry PMI, you will often be offered a lower interest rate. This is simply because your loan is insured which makes your lender more secure.
• Some lenders are bringing back “piggyback loans”. These loans help to cover a part of the down payment. These loans are however, for people with excellent credit and very low debt.

• There are a host of government and some private programs that offer assistance,

• There are many programs offered to homebuyers through the government and other agencies that are there to help you get your home. Resources such as the Home Loan Learning Center can help you find the one that best fits you.

 Myth #6: Your only additional costs will be PITI.

Yes, you will have the additional costs of principal, interest, taxes, and insurance but don’t leave out the others. There is of course your down payment, you may have homeowner’s association (HOA) fees, and don’t forget the utilities. It is very important to remember these and to work them into your budget. Many new homeowners were previously renters. Just realize that your utilities are probably going to be higher, and those utilities that used to be included when you were a renter, are now paid for by you. Of course, you must remember that you now have to cover your own maintenance too. This is one of the biggest holes that new homeowner’s can fall in to.

Myth # 7: You get more in the suburbs than the city.

There is some truth here. Since land is less expensive in the suburbs than the crowded city, you do get more of it for a lower price. This is why the suburbs can offer big homes, while the city offers more apartments and townhomes.

However, don’t forget to calculate the costs it will now take you to travel to the city. Since most people work in the city, you’ve got to factor in gas, tolls, more car maintenance, and parking costs. This isn’t just to get to work and back, it’s going to the store, visiting friends and family, going somewhere to eat. All of these things that are right at your doorstep in the city are widely spread out over the vast suburban locale.

Also, you’ve got to calculate your time. Every minute that you spend travelling or sitting in traffic, is one more that you could used sleeping in, spending with your family, or simply relaxing.

Myth # 8: You need perfect credit to get a home.

Yes, your credit score does impact your loan approval and the interest rate that you can get. However, you can still have less than great credit and get approved for a loan. Too often people are afraid to try for a loan simply because they don’t have perfect credit. Though your interest rate will probably be higher, many lenders who are more than willing to work to find something will fit your needs.

Myth #9:  Lenders can share your information.

This is absolutely not true, without your permission, no lender can share your information with others. There are privacy laws put in place by the state and federal governments specifically to protect you from anything like this happening.

Myth #10:  By cutting out the realtor, you can save yourself some money.

Yes, your realtor gets a commission from every sale. So why not cut them out of the whole deal and save a little money? The answer is simple: you are not paying the commission, the seller is. Usually, the commission for the sale of a home is split between your agent and the buyer’s agent. The commission, which is typically 5-6% of the sale, is generally subtracted from the proceeds of the home sale after the deal is settled.

With all the whirlwind of finding and then buying that special home, whether you’re a first time home buyer or a seasoned pro, these home buying myths can fool you. It’s important to see the truth behind them so that you can walk into the real estate market with confidence and get just the home you’re looking for. Contact us, and we will help you find your dream home.