First time homebuyers have many questions concerning things they must consider when buying a property, the amount they must spend, and the different sources they can tap to finance their investment. To assist first time home buyers in Texas and other parts of the U.S., many government bodies operate loan programs for first time home buyers. The aim of these programs is to help first time homebuyers secure home loan at relaxed norms. It is also important for homebuyers to avoid some common myths related to buying a home for the first time. To help buyers take steps in the right direction, the post lists some such misconceptions and corresponding facts. Take a look.
1. Buyers Must pay 20 Percent of the Loan Amount as Down Payment
Many buyers think they need to pay 20 percent of the loan value when buying a home. Though there is no denying the fact that paying 20 percent down payment can help lower your interest rates, this certainly is not a qualifying criterion to get a loan. Many lenders offering conventional loans accept a lower downpayment, if you are willing to pay a higher interest rate. Opt for a private mortgage insurance, a fee that lenders charge for borrowers who pay less than 20 percent down payment. You can also opt for a loan program backed by government bodies such as USDA loan, VA loan, or FHA loan that have relaxed down payment norms.
2. Buyers With bad Credit Cannot get a Loan
A good credit score is one of the important factors lenders consider when approving a home loan case. That said, many lenders offer loans to buyers with bad credit provided they are ready to pay a higher interest rate. Further, lenders offering VHA, USDA, and FHA loans have relaxed credit score requirements and in some cases lend even to borrowers with a weak credit score (600 or less).
3. Using the Services of a Real Estate Agent is a Waste of Money and Time
There is no denying the fact that in this Internet age buyers can get important info with the click of a mouse. Many real estate sites have listings that provide info about vacant properties, and circle rates. All properties, however, are not listed which can result in the buyer missing out on some good houses within their budget. Local realtors have info about such properties and can help the buyer get the best deal according to their requirements. Further, real estate agents are negotiation experts and can help their clients save more when investing in a property.
4. A 30-Year Mortgage is Always the Best Option
Many first time home buyers prefer opting for a 30-year mortgage instead of a 15-year one due to the low EMI. 30-year mortgages, however, have a higher interest rate. When choosing between the two mortgage terms, it all comes down to the buyer’s preference. Borrowers who are cash strapped but do not mind paying a higher interest rate can opt for a 30-year mortgage. For buyers with a steady income and savings opting for a 15-year mortgage can be the better of the two options.
Buying a home for the first time can be a daunting task as the buyer, in most cases, has no or very limited clue about the factors to consider when investing in a property. If you are a first time homebuyer, avoiding these myths can help you take informed decisions. Further, when opting for a loan, discuss the pros and cons of different programs with your lender or a loan consultant.