You’re considering buying your first home. Congratulations! It’s a big step and an investment that will hopefully bring you happiness and help you build equity for years to come. Before you start perusing listings, however, it pays to understand a few home buying misconceptions:
Owning isn't always better than renting
Consider how long you plan to live in the home and whether you’re prepared to deal with all the responsibilities. “While you can hire someone to do your yard,” in most cases it’s up to you to replace your roof, heating system and to tackle plumbing problems, said Sue Adler, Realtor® of the Sue Adler Team Keller Williams Realty Premier Properties in Short Hills. One exception is in homeowner association communities, some maintenance may be covered but there are annual fees that come with it. If you’re planning to be in the home more than a few years, Adler recommends buying so you can lock in historically low interest rates.
Janen Ardia, Realtor® and broker/owner of RE/MAX Heritage Properties in Chester, adds renters on the fence may find their monthly mortgage would cost less than they’re currently spending on rent. She encourages potential buyers to talk to a mortgage representative to find out whether they qualify for a mortgage and what their monthly payment would be. “This should be done as soon as possible so if there are issues that need to be addressed on their credit history, they can work with the mortgage company to correct them and move forward to their purchase,” said Ardia.
Reality TV is a Realistic Depiction of homeownership
House-flipping shows make renovations look easy, but material and labor costs are often far pricier than what’s depicted. “Don’t base your repairs budget off of these shows,” said Adler. Episodes often make it look like every buyer finds three homes that fit their needs perfectly and simply must choose their favorite, but that’s not so in today’s competitive market. “Hot houses in any market will have multiple offers, and you need to go in strong with price and terms to get a house,” said Adler. Also, you’ll pay a premium for homes that look like HGTV “afters,” so be ready to look “past decor and minor cosmetics for the hidden gems,” said Adler.
If I own my home I can do whatever I want
You probably can blast your stereo at 2 a.m. if you live on 10 acres in rural Sussex County, but if you’re in a high-rise Jersey City condo, that could be a problem. Same goes for major remodeling or additions, since you’ll have to follow local town or zoning guidelines.
My Credit Had to Be Stellar.
Having a credit score of 620 or higher should qualify you for a conventional mortgage and help you get a better rate, according to NerdWallet, but government-backed loans may be an option if you have a lower score. Lenders will often work with you upfront on how you can improve your credit before applying for a mortgage and can help you obtain a loan that suits your financial situation.
I need a 20% down payment
Putting 20% down helps you avoid private mortgage insurance, but there are other options, including 0% down for Veterans Affairs loans and as little as 3.5% down option for FHA loans. In recent years, so-called physicians loans have become very popular and are “a great way for new doctors to buy a property,” according to Jeanne “Lisa” Wolschina, a Realtor® and broker salesperson with Lisa Wolschina & Associates at Keller Williams Haddonfield. “Banks know that physicians will be making a great salary in the future so they are willing to overlook the enormous debt many doctors have from medical school.”
We need cash for closing costs
Some mortgages allow buyers to roll some closing costs into their new loan. Since contingencies and seller concessions are rare in a hot market, a buyer who might offer $300,000 and ask the seller to pay $10,000 in closing costs could make a clean, and potentially competitive, offer of $310,000. “This helps buyers without much cash left over for closing costs, outside of the down-payment and mortgage, to increase their price by the amount needed to close,” said Ardia. The seller then credits the extra amount towards the closing costs, which are typically paid by the buyer at closing.
The housing market's too hot to buy
Low inventory has meant multiple offers but don’t let that stop you from home shopping. If you love the property and are happy with the numbers, there’s truly no bad time to buy, particularly when rates are at historic lows.
I’m good at DIY stuff so I can skip having the property inspected.
Having an expert opinion is invaluable. “It doesn’t matter how handy you are, you still cannot tell if there is an underground oil tank buried or if radon levels are high,” said Wolschina. “You need experts to identify those very important, and unfortunately, very costly, inspection issues. I would never advise a buyer to skip an inspection.”
I can Handle Everything on my own
Agents often hear about listings before they hit the market, and have plenty of experience dealing with issues that pop up during a sale. They also have a network of mortgage lenders and attorneys who can hold your hand along the way. Realtors® are a valuable resource, especially for first time buyers who can easily be overwhelmed.
“The general public would be shocked to learn all that goes into getting a transaction to the closing table,” Wolschina said. “From the moment you make an offer to the day you get the keys in your hands, there are about 12 entities that have their hands in the transaction. A Realtor® helps make sure all of those pieces come together and no balls are dropped.”