Making the decision to buy a home is a big step. Not only does it show you are ready to commit to one location for the time being, but the purchase of your first home is also an important financial investment. Unfortunately, many first-time buyers struggling through the purchase process because they believe many myths associated with real estate and mortgages. By debunking these common myths, you will be better prepared to make your first home purchase.
You Need a Large Down Payment
The more money you have to put down on a home, the better since this will decrease the total amount you need to be financed. However, it is important to note that a large down payment is not always needed.
On average, lenders will expect you to put down a minimum of 5 percent. In some markets, a larger down payment of around 20 percent is necessary to secure the mortgage. Of course, there are programs available that may reduce the total amount you need to pay down on your first home.
Lower down payments are possible if you qualify for a VA, USDA, or FHA loan. To qualify, you will need to be a veteran, live in a rural area designated by the USDA, or be approved by the Federal Housing Administration. Your lender can discuss each option in more detail with you.
Your Credit Must Be Perfect
It is safe to say that having perfect credit can be beneficial when applying for a home loan, but perfect credit is not mandatory.
For a conventional loan, 620 is the minimum credit score to qualify. VA, USDA, and FHA have lower minimum requirements, but the lender will look at other factors in your application before approving you. The better your credit is, the lower your rate will be. If you want a lower monthly payment, a lower interest rate will be necessary.
After the lender runs your credit report, they will discuss which parts of your credit are hurting your total score. They are also capable of advising you on how you can improve your score quickly, which will help you qualify for the better interest rate.
While surprising to learn, raising the credit limits on your credit cards can give your score a large boost in a short period of time. Contact each credit card company and request an increase in your limits. This will improve your overall debt to net ratio while increasing your score.
Buying your first home does not have to be a confusing or stressful experience. Learning the truth behind these common myths will help you through the purchase process of your first home. Contact a company like RE/MAX QUALITY REALTY for more information and assistance.