There are a few common misconceptions and downright myths about buying a new home that always seem to complicate things for first-time buyers. Luckily, you have come to the right place for a little light debunking. From down payments to credit scores, here’s what you need to know.
All Lenders are the Same
One of the biggest myths about home purchases and mortgages is that all lenders are the same and only think about money. Of course, they are running a business, but it isn’t in anyone’s interest to broker a bad deal. Every mortgage broker service has varying rates and fees, and there are other variables that can impact the terms of the contract. For example, you might have higher fees with a poor credit score and interest rates may be affected by the current economy.
A Big Downpayment is Needed
This is one of the biggest misconceptions about home buying. Okay, a down payment will always be a good idea, and it can increase the chances of being accepted for a mortgage. However, whether or not you need one depends on the type of mortgage and your personal situation. For example, in the US, Veterans Affairs and Department of Agriculture members don’t need any down payment, and there are conventional mortgages that will accept 5%.
Buying a New Home is an Investment
Sure, a home can be an investment, but it isn’t in most cases. Like cars, homes lose value for various reasons. Because of this, the ROI on a property can be quite low. In the UK, the average ROI on a home sale is around 6%, but it depends on the location, too, which can bump it up to around 10%. It also depends on the condition of the home. It is wiser to invest your spare cash into other things that will potentially earn some money over the long term.
You Need an Excellent Credit Score
No, no, no! You do not need an excellent credit score to be accepted for a mortgage. Some brokers use credit scoring as a means of assessing your situation, but it isn’t the only tool they use. There are careful calculations that also take into account your current situation as to whether you will be accepted. Additionally, there are specialist mortgage brokers that deal with first-time buyers with low credit scores. So don’t let this one thing put you off from applying.
Renting is Usually Cheaper
Is renting cheaper? Not really! When you consider the cost of renting these days, that money would be better used to pay off a mortgage. Sure, it can be safer in some ways, as there is no risk of losing your house by missing a couple of payments. However, some would say renting is a waste of money that could be used more wisely. Of course, there are arguments on both sides of the camp. You can pay rent for the entirety of your life and have nothing to show for it.
All lenders operating the same is a common myth people think when buying a new home. Another myth is that a home is an investment, which it can be, but it’s not guaranteed. However, it can also be said that renting is not cheaper when you consider the costs against mortgages.