Buying a home is one of the most significant financial decisions you’ll make. There’s no question that investing in today’s hot market can be a difficult and time-consuming process. To guarantee a smooth and successful experience, ensure you’re well versed in the ins and outs of buying property — especially if it’s your first time doing so. Part of getting prepared is debunking myths you might unconsciously have. With this in mind, let’s take a look at eight of the top buyer misconceptions in Cedarburg and the truths behind them.
1. A 20% downpayment is required
Most home buyers finance their home purchases despite the current hype around paying all cash when buying. One of the biggest misconceptions among housing consumers is the percentage expected for the down payment. Some first-time home buyers believe putting at least 20% towards a downpayment is required. When surveyed, 35% of this consumer group thought they needed 16% to 20% for a down payment, and more than 10% thought they needed more than 20%.
While a 20% downpayment is ideal if you’re looking to avoid private mortgage interest (PMI), it certainly isn’t a requirement. On the contrary, you can put as little as 3% down on a conventional mortgage or even less if you might qualify for USDA or VA loans. Research by the National Association of Realtors has shown the median down payment on a home in the United States is 13% — substantially less than 20%.
While a down payment might seem the only way to get a competitive interest rate or low monthly payment, it’s not. Other factors such as credit history, income, and debt impact your loan program. Stay on top of all these factors for the best opportunity to buy Cedarburg homes.
2. A 30-year mortgage is the best option
A 30-year fixed rate mortgage is popular, thanks to lower monthly payments. Although this is the most sought-after choice, it doesn’t always make it the best. Those who can afford higher monthly payments should consider going with a 15-year or 20-year fixed-rate mortgage. This will enable you as the buyer to reap the benefits of owning your home outright in less time.
Considering that shorter-term leases also traditionally have lower interest rates, homebuyers will pay less throughout their mortgage. With an agent you trust, scrutinize your mortgage options and how they relate to your plans for your Cedarburg real estate.
3. You need to have a perfect credit score
Credit scores can undoubtedly be a complicated topic for even the most financially savvy buyers. Most understand an excellent credit score can significantly boost your chances of qualifying for a mortgage as it shows the lender you’re likely to repay the loan on time.
As a buyer, you might be under the impression your credit score needs to be perfect to buy a home. However, you’ll be relieved that your credit score doesn’t need to be a perfect 850 when purchasing a property. In fact, for most loan types, the credit score needs to be at least 620.
While a low credit score doesn’t automatically disqualify you from buying a home, a higher score can boost your chances of approval. Borrowers with scores under 650 typically make up a small percentage of closed purchase loans. If your score is below 620, lenders might hesitate to approve your loan or offer you a higher interest rate. The minimum score you need to qualify can vary depending on the type of mortgage you’re seeking to obtain. This can result in a higher monthly payment for your home. With that said, it’s still possible to get a loan with a lower credit score, including scores even in the 500s.
4. You only need to talk to one lender
While it might seem like the easy route to get your mortgage from the first and only lender or bank you talk to, this can ultimately hurt you in the end. You risk potentially leaving thousands of dollars on the table by not comparing offers. To ensure you’re getting the best possible deal, it’s a good idea to shop around with at least three different lenders and a mortgage broker.
Try to get all rate quotes on the same day, as rates fluctuate regularly. Upon receiving your varying quotes, sit down and thoroughly compare rates, lender fees, and loan terms. Remember, the more you shop around, the better understanding you’ll have to guarantee you’re getting a good deal and the lowest rate possible.
5. Fall and winter are bad times to buy
Research has shown spring is the most popular season to buy a home. More specifically, the first two weeks of May have historically been the most popular time to list. During this time, sellers generally sell faster and above the listing price.
Many buyers might also think fall and winters are bad times to buy, but this misconception couldn’t be further from the truth. On the contrary, the real estate market cools down during the fall and winter, making it the best time to buy property. The slowest months of selling activity are November, December, January, and February, as they’re the least expensive times to purchase a home.
6. You don’t need a real estate agent
If you’re debating whether or not you should opt for doing it alone, the short answer is no. Some buyers hesitate to work with a realtor as they hope to avoid the subsequent fees. Many first-time home buyers might believe they will be expected to pay substantial fees if they work with one. In this instance, it’s worth noting that typical buyers do not pay a real estate agent’s commission — sellers do.
There’s a long list of reasons why hiring a realtor when buying is worthwhile (as opposed to doing everything on your own). A realtor will help guide you through the process from start to finish to help you find your dream home that exceeds your expectations.
An experienced local agent will have extensive knowledge of the local market and market trends. They learn about properties first, often before they’re even listed. This is especially imperative considering buyers generally search for eight weeks and look at a median of nine homes before buying one. And that’s not all — a strong agent will provide expert guidance when negotiating with a seller when it comes time to throw your hat in the ring and make an offer.
7. Student loans will stop you from buying a house
Many first-time home buyers believe their student loans might keep them from financing a home. According to the National Association of Realtors, 83% of non-homeowners say student loan debt prevents them from buying a home. However, having a student loan isn’t a deal breaker when it comes to getting a mortgage and doesn’t automatically eliminate you from qualifying for a home.
The main priority is that you’ll need to keep up with your loan payments, including student ones and a house mortgage. Showing you’re responsible with debt payments is a great way to show lenders and credit bureaus that you are a good, responsible candidate for owning a home.
8. A home inspection is a requirement
Considering how many buyers get a home inspection, many potential homeowners believe it’s a requirement. However, most places, including Cedarburg, don’t require one. This means that you, as the buyer, will have the freedom to decide whether you want to move forward with a home inspection or bypass it. A growing number of buyers are choosing to forgo home inspections to make their offers hassle-free and bump them to the top of the seller’s list. With multiple buyers vying for listings, it’s not surprising some eager buyers agree to waive this timely process.
If you don’t feel comfortable cutting corners on the home inspection, then you’ll be relieved to know it is still possible to make a firm offer without waiving the inspection. You’ll want to be fully prepared and have a mortgage pre-approval letter from a lender in hand. Make your offer more appealing to the seller by asking for an “informational inspection” rather than an “inspection contingency,” which lets your seller know you won’t be asking them to pay for any issues that may be uncovered during an inspection. To compensate for this added requirement, consider making a larger down payment, which can make the seller look closer at your offer.
If you’re ready to explore Cedarburg homes, please don’t hesitate to contact Jaime Lubner today. As an expert in Cedarburg real estate, she is equipped to help you find your dream home. Real estate transactions are milestones in your life — that’s why working with a trusted advisor is vital. Jaime and her team are skilled, understanding, and responsive as your advisors.
Attention to detail is crucial in all its forms: creativity, tech-savviness, and proactive communication. Contact Jaime and the team if you’re looking for a permanent residence or a vacation rental. They will guide you through the process from start to finish.