While buying a house, one needs to consider a lot of things. The advice can pour out from different sources, including family, friends, real estate agents, and lenders. However, more than what you should know about the essentiality of buying a house, one also needs to know the different myths surrounding purchasing a home.
Myth #1: Making a Down Payment of a Preset Percent
Many people believe that you have to make a fixed percentage of the down payment when you buy a house. Nevertheless, one can avail of different schemes and opportunities to vary the down payment percentage. For instance, military employees and veterans are eligible for VA loans and can seek down payments of even zero. VA loans are the safest option to finance a home with its low foreclosure rates. Moreover, the rural home also constitutes leverage when it comes to down payment percentages. Some buyers might get eligible for certain types of loans, such as federal housing administration loans and mortgage insurance, with minimum down payments of even 3.5%.
Myth #2: Buy the Worst House for Best Bargains
Buying the worst house in the best neighborhood will only fetch you troubles. Buyers mostly seek bargains and end up purchasing the worst home in the best neighborhood. If you think of doing something like this, consider that renovations come with extra expenses, unexpected cash outflows, and other surprises, which might create a hole in your pocket. Improving a house takes money. Moreover, the best neighborhoods have strict homeowner associations with rules ranging from home additions to exterior paint colors, and you do not want to get into such a mess.
One can go for the worst house if they do not mind spending thousands more on the renovation and have a flexible and manageable budget.
Myth #3: Buy a House in the Spring
There might occur a lot of available inventory in the spring, and one can get hold of their dream house this season. However, real estate market values rise in the spring due to the increase in demand.
One should seek price listings and ads throughout the year. Proper research and an eye for detail and observation are crucial to get the best deal. Concerning the spring sale, you can always opt for a spring selling sale that starts towards the end that has a lowering in prices. Also, several homes for sale Calgary NW are present, and one only needs to seek a reputed seller to buy their dream house.
Myth #4: the Famous 36% Income Rule
The famous 36% income rule need not work for everyone at all times. Capping the home and mortgages you can afford at 36% of your income is unnecessary. Housing ratios most take into account the taxes, insurance, interest, loan principal and divides itself into monthly qualifying income. This percentage can come up to a good 49%. Therefore, the 36% rule does not work out every time. The most crucial thing to consider is whether you would repay the loan amount without a severe financial crunch. In other words, the ability to repay the banks and the lenders matters the most.
Also, ensure you do not put these ratios to a maximum. Such a step will put stress on your financial assets. Decide based on all your assets and your stable income. One should never hurry while buying a house. Therefore, take your time to plan out your finances. Take aids and advice from financial and real estate experts if you need help.
Myth #5: The Inspection in the Seller’s Market is Not Needed
No need for an inspection is a grave myth that augments the aftermath problems of buying a house. Inspecting the seller’s market is crucial before purchasing the house. Moreover, you need to review more than three properties of the seller to get a better judgment. Inspecting a home’s problem in detail will give you a clear idea of what kind of investment it will need in the near future. Keep a written word with you in regards to any home renovations within three or so years. This assures you and the seller and keeps you away from all the early problems.
Myth #6: Work for the Lowest Interest Rate
Paying thousands of dollars in points in return for a super low or an adjustable mortgage rate can indeed cost you more money when you plan to sell or refinance a loan in a few years. Moreover, it can even cause a foreclosure. One needs to keep in mind that shopping for a rate might save you hundreds, but shopping for the right lender can save you thousands more.
Myth #7: Bad Credit Will Not Support Your Home Plans
Bad credit is never an end for buyers. Several lenders have different credit score rates. So if one lender rejects you because of your credit score, some others might not as they have a lower credit rate. Such rates depend on several factors, and the lenders mostly set this rate based on the house rate and your debt score.
Even though bad credit will not come in the middle of getting a loan, one needs to check their credit report and pay off the credit debt. Experts believe the debt-to-credit utilization ratio should not exceed 30%. One solution to achieve these metrics is to request an increase in your credit limits.
Myth #8: Pay Adjustable Rate Loans Faster
Many people misinterpret how adjustable rate mortgages work. Such loans start with a locked-in interest rate, further fluctuating with the timeframe. When you usually think that you have seven years to pay the loan, you have more than that, but you have a fixed interest rate for seven years, after which the rate of interest will change. It need not mean that you have to complete a loan in seven years.
The above pointers debunk the myths, making the buyers aware of the different crucial elements regarding real estate and buying a house.