So you're ready to buy a home. You've searched the listings and found the perfect home in a wonderful neighborhood. If you've never bought a home before, you may be tempted to ask friends and family members who own a home for home buying advice. While they probably have the best of intentions, not all home buying advice will be in your best interest. Check out these top eight home buying myths before you head out to pick out paint colors for your new living room.
1. Buying is ALWAYS better than renting. This depends on the price of the home and how long you plan to live there. Experts recommend staying in a home at least 5-7 years to ride out the peaks and valleys of the real estate market and make a profit. If you think you'll be moving in the next couple years for school or another job, it may be best to continue renting until your plans are more secure.
2. Looking at homes is the first step. Sure, you'll want an idea of what the current market looks like. But if you're touring homes, you may fall in love with something you just can't afford. Before anything else, work with your financial adviser and mortgage lender to learn how much you can spend and what you qualify for. The market is still very strong in Reno right now. Being pre-qualified for a loan can go a long way when you do make that offer on your dream home.
3. Your only upfront cost is the down payment. Many first time homebuyers believe this myth. Buyers should be prepared to pay for some of the closing costs, the inspection, taxes and fees in addition to the down payment. A mortgage professional should be able to give you a general idea of what you can expect to pay in closing costs.
4. A 30 year mortgage will always be the best option. A 15-year and a 30-year mortgage are structured similarly, but you could end up paying more in interest with a 30-year loan. Why? When you first start to pay back the loan, the bulk of the payment will be toward interest. But, as you get closer to paying off the loan, the bulk of your payment goes to the principal. With a 15-year loan, your monthly payments will be higher, but in the long run, you'll be paying less in interest. Want to see how much you'll be paying? Check out our mortgage calculator.
5. You should choose the lender with the lowest rates. You have every right to shop around and choose a lender you're comfortable with. Good rates are important, but so is good customer service. A lower interest rate isn't always the best deal if the customer service is terrible or you can never actually reach anyone when you need to.
6. If you've saved enough for a down payment, you can afford a home. In addition to the closing costs, home buyers need to consider property taxes, insurance and the cost of home maintenance and upkeep. HomeAdvisor estimates that Reno homeowners spend around $1000 for a water heater replacement. Pest control, utilities, yard maintenance and basic home upkeep all add costs to the monthly budget. Work with your financial adviser to understand just home much home you can afford.
7. You don't need a real estate agent. Technically, this is true. However, homebuyers shouldn't have to pay any Realtor fees and Realtors can help you negotiate for the best deal. Realtors may also have access to other homes that you won't find on the major MLS aggregate sites. Realtors are also very good at helping you decide what kind of property would be best for you. They might show you an option that you end up loving that you may not have considered before.
8. You can't buy with bad credit. Good credit will likely help you get a loan with a lower interest rate. Other things lenders consider are income, your amount of debt and savings, and your credit history with the lender.
Are you interested in purchasing a home? We will be happy to recommend mortgage lenders and work with you to find a home that meets your needs and lifestyle. Call us at 775-453-4568 or contact us here.