Myths Associated with First Time Homebuyers

Today’s real estate market is ideal for first time homebuyers.  In addition to a huge inventory of available properties, the cost of homes is way down and interest rates have not been this low in a long time.  Because of the current situation, a person could find a home that would normally appraise for $200,000 and be able to purchase it for $160,000.  However, along with all the positive aspects of first time home buying some challenges also exist.  For instance, although interest rates are way down, lenders have put tighter restrictions on who can be approved for

Today’s real estate market is ideal for first time homebuyers.  In addition to a huge inventory of available properties, the cost of homes is way down and interest rates have not been this low in a long time.  Because of the current situation, a person could find a home that would normally appraise for $200,000 and be able to purchase it for $160,000.  However, along with all the positive aspects of first time home buying some challenges also exist.  For instance, although interest rates are way down, lenders have put tighter restrictions on who can be approved for a mortgage loan because of the world financial crisis.

Even with a few bumps along the way, we would encourage you to find a highly qualified real estate agent, someone who would be there to answer your questions, guide you through the process, and stand beside you to make sure you are not taken for a ride.  However, in this article, we wanted to dispel some of the more common myths that have been circulating for a long time.  The truth is that the more you can learn about the ins and outs of first time home buying the easier the process will be and the better chance you have of purchasing the perfect home for your situation.

For starters, many people who have never bought a home before still believe that they need a 20% down payment.  With money tight for most everyone, trying to save that much money is discouraging so people keep renting.  In truth, you can get into a home for as little as 3% down depending on the loan program.  In fact, first time homebuyers have a number of advantages of people who have purchased homes previously in that the government has devised a number of special programs just for them.

Another myth pertaining to first time home buying is that to qualify for a mortgage loan, you would need to have a minimum of five years with an employer.  While it is true that job stability accounts for a lot, most mortgage lenders look more that the industry a person has worked rather than a specific employer.  For instance, if you have been a teacher for the past 15 years but only with one particular school district for two years, the lender would see job stability in you being in the same sector for 15 years, not two.

Many people also still believe that the only way to qualify for a mortgage loan is to have perfect credit.  It is true, especially due to new government laws that good credit will take you much further than imperfect credit but if you have some flaws on your credit report you may still qualify for a home loan.  As an example, if you had filed bankruptcy three years ago but since that time had made good financial decisions, many lenders will look past it.  The only drawback to having poor credit when applying for a home loan is that you would pay much higher interest rate than someone with excellent credit would.

Unfortunately, many first time homebuyers also believe that lenders are required to offer the lowest interest rate available but this is simply untrue.  The amount of interest charged on a mortgage loan is based on a number of factors.  As mentioned above, your credit score would be one factor.  The lower the score the more interest you would pay.  However, many other things are considered so before locking into any loan agreement, you have the right and responsibility to ask on what basis the interest being offered was made.

Finally, people are often confused about the interest charged on a mortgage loan specific to it being tax deductible.  When buying a home, many expenses are tax deductible to include the closing costs, interest on the loan, and even any points.  When comparing the financial benefits of renting versus buying, having many of the expenses of buying being tax deductible is a huge reason to start looking for a home of your own.