If you’re looking to buy a home for the first time, you’ll want to be aware of a few common myths regarding real estate transactions.
“You will need a 20% downpayment.”
Many people have heard that you need a 20% downpayment when buying a home. This is not the case. There are loan options that offer a downpayment as low as a 3.5%. If you’re a veteran, you may even qualify for a 0% downpayment! Keep in mind that these options will require you to pay PMI (private mortgage insurance). PMI can be removed once you have 20% e
quity in the home.
“You will save money if you don’t use a real estate agent.”
Typically, buyers do not pay real estate agents; seller’s do. When someone lists their home for sale with a real estate agent, they agree to pay a percentage of the sale towards commissions. The listing agency then splits this commission with the agency that brings the buyer, leaving you with no money out of pocket AND all of the help, experience, and benefits that only a real estate professional can provide.
“There is no need to speak with a lender until you find the home you want.”
Definitely a no no. If you’re considering beginning your home search, you definitely want to get in touch with a lending institution to get pre-approved BEFORE you look at potential properties. The market is HOT HOT HOT right now and offers are often being submitted within days (even hours) of a property being listed for sale. Simply put, if you have not been pre-approved, you cannot put an offer on a home (unless it’s a cash deal).
“You have bad credit and won’t be able to obtain financing.”
For those that have less than perfect credit, do not feel intimidated or in fear of bad news from a loan officer about your ability to obtain affordable financing. Other factors come into play when looking into possible home loans, such as the amount you have in savings, your current debt, etc. The only way to know is to speak with a lender and tell them your situation. Trust me, they WANT to work with you to find a home loan that will enable you to purchase.
“Always go with the lender with the lowest interest rate.”
People may not realize how important it is to work with a reputable and customer service oriented lender. You want to be able to easily get ahold of your loan officer with any questions or concerns about the financing process and have them provide you with prompt, knowledgeable and helpful feedback. Of course, your interest rate is going to be an important factor. But be sure to ask potential lenders about any other fees that are associated with the type of home loan that you may be getting from them.
-Dana Eller, St. Louis Realtor.