5 Home Buying Myths
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While a lot has changed in the housing market, home buying myths continue to plague potential buyers.
Check out these 5 home buying myth busters:
- You need to put 20 percent down.
There are home loans that allow you to put down only three percent. For some first time home buyers, Veterans or those that qualify for the USDA program, you may not be required to put any money down. In 2014, the median down payment was six percent according to the National Association of Realtors.
- You must be debt free.
From student loans to credit cards, everyone has some degree of debt. Accruing debt and showing trustworthiness to pay it back, is a crucial element of your credit score. The bigger issue is to make sure your debt-to-income ratio is not too high. A good rule of thumb is to keep your monthly house payment around one third of your income.
- You need amazing credit.
Your credit score factors into getting a better mortgage rate. However, even those with bruised credit can qualify for a home loan. Some loan options can be approved with a score between 600 and 620, although your interest may be higher.
- Pre-Qualification and Pre-Approval are the same thing.
While these two terms sound alike, they are different steps in the home buying process. Pre-Qualification is the beginning conversation to determine what kind of loan you might be eligible for and to estimate your budget. Pre-Approval requires a mortgage application and will give you the amount you are able to borrow.
- The seller pays all the closing costs.
This isn’t always the case and is no longer the norm. With closing costs burning between two to five percent, there are other upfront costs (such as appraisers and the title company) which can cost an additional three to five percent.
Find out more about Numerica’s Home Loans here or call 800.433.1837.