14 Real Estate Myths That Could Cost First-Time Buyers Thousands
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Buying your first place is a big deal and a mix. It’s exciting, terrifying, and full of questions. First time buyers often strike out with high hopes but end up swimming in a sea of misunderstandings, in part because of all of the real estate myths that are out there. As casual “tips” from a friend or old advice online, these myths can sound convincing until they don’t, and could end up costing you more than you’d think.
So you don’t fall into these traps, leave more money in your pocket, and less stress on your shoulders, let’s separate the facts from fiction.
Your Credit Score Must Be Perfect
A strong credit score helps, but it’s not the be all, end all of home buying. People think you have to score near perfect to get a mortgage. In truth, FHA loans and other options are designed to fit borrowers with lower scores. If you’re responsible with credit, you may be further along to homeownership that you think.
It Is Better to Skip a Real Estate Agent
It may seem like a smart way to save, but skipping a real estate agent most of the time will actually cost you more. Agents bring local knowledge, negotiation skills and know how the market is trending, which can save you from overpaying. A good agent doesn’t sell you a home, they protect you from bad deals. They can more than make up for the commission.
The Asking Price Is Non Negotiable
Many first time buyers think that whatever price a house is listed at is what they will have to pay, which isn’t always the case. A hot market might have fewer discounts, but there’s always room to haggle. Sellers put a price on the property but if it hasn’t sold then they may be more willing to negotiate reasonable offers. Don’t be afraid to ask your agent if there’s wiggle room.
Only Single Family Homes Are Worth Buying
Sure, single family homes have the old white picket fence look, but that’s not the only good option. In areas where single family homes are out of budget, condos, townhomes, and even duplexes can be fantastic buys. Plus, these properties can be easier to maintain and still have equity built over time.
You Can Just Trust Online Listings
A great start is online listings, but they only present part of the picture. Some listings may be outdated, not contain pertinent information, or miss some properties altogether that haven’t yet appeared online. Also, photos can really make things look a lot bigger and prettier than they are. The more accurate sense of what’s available is working with a trusted agent or attending open houses.
Always Choose the Lowest Mortgage Rate
You want the lowest rate, but that doesn’t always mean it is the best choice. Lower rate loans are sometimes not as cheap as they seem, because they have hidden fees, or they adjust after a certain period. Compare all the terms of each loan (that is, the initial rate, not just comparing initial rates) to determine what will best fit your financial needs.
It’s Not That Crucial to Have a Home’s Inspection
Thinking you can skip a home inspection to save time or money is a shortcut that can be risky. Inspections find the potential repairs that could cost thousands down the line. A study has shown that 86 percent of buyers who had inspections found something that needed to be repaired before the closing. You never want to commit to something you don’t know about.
If the Market Is Competitive, You Shouldn’t Buy
While a competitive market can be scary, that doesn’t mean you should be sitting on the sidelines. Of course, prices might be higher, but if you wait for the “perfect” time, you may miss equity growth. Real estate markets are never predictable, and what’s hot today could be normal a year from now. Though it can still be a good time to buy if you’re ready and able.
You Need a 20% Down Payment
Decades ago, the old 20% rule has passed down and it’s just not a must have anymore. While 20% down has benefits (like avoiding private mortgage insurance), there are tons of loan programs today where you put down way less. First time buyers only put down an average of 7%, according to the National Association of Realtors. In fact, if you’ve been panicking about saving that big chunk, you may not actually need as much as you think.
A Bigger House Is Always a Better Investment
The bigger the home, the better investment, right? However, that’s not always the case. With larger homes, there are higher taxes, more maintenance and in some cases a higher purchase price. Think about what you need – sometimes a smaller, well located property is a better bet and will grow in value just as much as a larger one.
New Homes Don’t Need Inspections
A home may be brand new, but that doesn’t mean it’s perfect. Construction issues, design oversights or even code violations can occur on new builds. Don’t gloss over the inspection because no one has been living there before. You’ll be a lot better off if you find out up front if there are any surprises waiting behind those fresh walls.
Before Buying a Home You Should Pay Off All Debt
While it’s good to pay off debt, it’s not necessary to pay off every single balance before buying a home. Manageable debt that you can afford doesn’t need to keep you from homeownership, and lenders look at your debt to income ratio. There are times when waiting to pay everything off may advance your purchase longer than you need to.
All Renovations Boost the Value of Your Home
HGTV makes it seem like every kitchen update and bathroom remodel will double your home’s worth, but it doesn’t always work that way. Some upgrades, like luxury bathrooms or pools, may not be as valuable as you might think, depending on what they’re like and whether they’re typical of your neighborhood. If you want to improve resale, concentrate on practical, widely appealing changes.
You Should Get the Nicest House on the Block
Grabbing the nicest home on the block is tempting, but that’s not always the best financial move. The priciest house you buy is often less room for appreciation than a slightly smaller or less expensive home in the area. Moderately priced homes for the neighborhood that have the potential to grow in value are usually the “best value” homes.
Disclaimer: This list is solely the author’s opinion based on research and publicly available information.
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