Home ownership is not for everyone, but for a lot of people it is something they dream about. No matter where you live, if you have that goal, my focus is to try to get you on the path toward that dream. When I hear from people that they would like to buy a home but haven’t yet, they often tell me a laundry list of reasons. Sadly, most of the time, what I hear preventing people from reaching their dream isn’t reality.One of the biggest reasons stopping people from buying a home is misinformation. It’s hard to know where they learn this, but lots and lots of people are simply not trying to buy a home because of things that simply aren’t true. So, I’m going to break down five of the most common myths I hear from other people they think are preventing them from buying a home.
MYTH#1: I DON’T HAVE A DOWN PAYMENT
Here’s the simple truth; for a lot of loans, you don’t need a down payment. Really! There are a lot of options for zero down loans. That’s right. Zero percent down. There’s also 3%, 5%, and 10% loans. Now, loans with less of a down payment are considered higher risk by the lender, so the interest rates are a little higher, but can still be a much better option than renting for several reasons we will cover in another post.True. Back in the day, down payments of 20% were common. Loans under 20% do have PMI or mortgage insurance attached to them, which it is ideal to get rid of. Ideally, you want to put down 20% so that you don’t have to deal with PMI. However, you can still purchase a home if you don’t have that kind of cash. You can get rid of the PMI with refinancing a couple of years later when the value of your home has gone up and you end up having 20% equity in your home because of the increased value.
MYTH #2: MY CREDIT IS REALLY BAD. I CAN’T BUY FOR A LONG TIME.
This is one of the most prevalent myths that I run into. In fact, I believed this for a while. What I’ve discovered, through personal experience and training is that usually this is an assumption of the person and not based on any research. My first question is always, “Have you talked to a loan officer to see if you qualify?” Nine out of ten times they haven’t.I remember when I bought my first home. Not knowing what I know now, I went to a home buying class to learn about the process. When I was there, I was encouraged to meet with the loan officer who was present. My wife and I were under the assumption that we were probably about 5 years away from being able to afford to buy a home based on our credit. However, after meeting with the loan officer and reviewing our credit with her, she helped us realize that we were 6 months away from being able to qualify not 5 years. We had this fear of our credit history that wasn’t based in fact. The truth is that you don’t know how bad your credit is until you talk to a loan officer and find out.
MYTH #3: MORTGAGES ARE TOO HIGH
Mortgages vary greatly depending on the type of mortgage and where you choose to live. One thing people often don’t realize is that the interest you pay on your home mortgage is tax deductible. Now, I’m not an accountant, but many people find that once you take the tax deduction of the interest, what you pay for rent is the same as a mortgage that is 20% higher. For instance, a $1,000 rent and a $1,200 mortgage are the same, once you take the deduction. Not only that, to some degree, your house is like a savings account. This is money you’ll get back one day when you sell. Rent money is something you’ll never get back.
MYTH#4: IT’S CHEAPER TO RENT THAN BUY
Several studies show that, in most of United States, it is cheaper to buy than it is to rent. In fact, in Washington State where I’m located, the median rent is $1,650 while the median mortgage is $1,515. Of course, this varies by specific city and neighborhood. This issue ultimately comes down to your priorities. If you are currently living in Downtown Seattle, you may not be able to afford to buy a home in downtown Seattle. However, would you be willing to add 10 extra minutes in your commute per day in order to own a home?And here’s the thing, your rent will always go up. Always. If you have a 30 year fixed rate mortgage, it doesn’t go up (unless taxes do.) More often it goes down, especially if you refinance or stop having to pay mortgage insurance. Rents are always raising.
MYTH#5: I CAN’T AFFORD A MORTGAGE
This is myth is also very common. Just seeing $300,000 for a mortgage is enough to make a lot of people lose hope. How could anyone come up with $300,000 at once, aside from winning the lotto or getting a surprise inheritance from a long lost relative? Well, remember, a mortgage is typically paid over 30 years. You take your time in paying it. Just do this, imagine paying rent that whole time. That’s 360 months. If you were to pay $1,000 in rent over 30 years, that’s $360,000 you’ll never see again. Granted, with interest on your $300,000 mortgage your likely to break even or pay slightly more than that; however, it’s money you’ll likely get back when you sell your home.Or think of it this way. They money you pay in rent, which will go up, is going to pay for someone else’s mortgage or building. The money you pay in mortgage, which most likely will go down, goes towards owning your own home. In a nutshell, It’s not so much whether or not you can afford to pay a mortgage, it’s a matter if you are going to pay your own mortgage or pay a landlord’s.
IN SUMMARY: If you have a dream of owning your own home, its not as impossible as it may seem. Hopefully, I’ve helped debunk some of the most common myths in home purchasing. If you have additional questions or would like to chat with me in person, post a comment below or contact me via social media (or phone, if you prefer). ABOUT THE AUTHOR Silas Lindenstein is a real estate broker with Skyline Properties in the Seattle area. Email – [email protected] Call – 206.351.9230 Facebook personal page – https://www.facebook.com/slindenstein Facebook business page – Silas Gets Real Follow me on Instagram – @SilasLaughs Follow me on Twitter – @SilasL