If you’re thinking about buying a home, you’ve probably received your share of advice from family and friends. Add to that the constant stream of TV shows, news segments, and social media posts that over-simplify the home buying process for easy entertainment, especially for first-time home buyers.

With so much information to sift through, it
can be tough to distinguish fact from fiction. That’s why we’re revealing the
truth behind some of the most common home buyer myths and misconceptions.

Buying a home is a big decision, but it
doesn’t have to be a scary one. If you arm yourself with knowledge and a
qualified team of support professionals, you’ll be well equipped to make the
right choices for your family and financial future.

DON’T
FALL FOR THESE COMMON HOME BUYER MYTHS

Myth
#1: You need a 20% down payment.

Plenty of buyers are purchasing homes with
down payments that are much less than 20% of the total cost of the property.
Today, you can buy a home with as little as 3-5% down.

There are multiple programs out there that
allow you to have a lower down payment, and a lender or mortgage broker can
talk you through which option is the best for you. Since you’re putting less
money down, you’re a riskier borrower to your lender than people who put down a
full 20%. Because of this, you will most likely need to pay mortgage insurance
as part of your monthly payment.

Myth
#2: Real estate agents are expensive.

Your agent is with you every step of the way
throughout your home buying journey, and he or she spends countless hours
working on your behalf. It sounds like having an agent is expensive, right?
Well, not for you. Buyers usually don’t pay a real estate agent’s commission.
Your agent’s fee is paid for at closing by the seller of the home you’re
buying.¹ The seller knows to factor this cost into the property’s
total purchase price.

Myth
#3: Don’t call a real estate agent until you’re ready to buy.

The earlier you bring in an agent to help with
the purchasing process, the better. Even if you’re in the very early stages of
casually browsing Zillow, a real estate professional can be a huge help.

They can create a search for you in the
Multiple Listing Service (MLS), so you get notifications for every house that
meets your criteria as soon as it hits the market. The MLS is typically more
up-to-date than popular home search sites like Zillow and Trulia. Setting up a
search a few months before you’re considering buying gives you a good idea of
what’s out there in your town that’s in your budget. Reviewing the MLS and
speaking with an agent as soon as possible can help you set realistic
expectations for when you actually start the house hunting process.

Myth #4: Fixer-uppers are more budget
friendly.

We’ve all watched the shows on HGTV that
encourage people to go after fixer-uppers because they’re more affordable and
allow buyers to eventually renovate the home to include everything on their
wishlist. But, this isn’t always the case.

Sometimes, homes that need a lot of work also
require a lot of money. Big renovations, like add-ons, a total kitchen remodel,
or installing a pool, take a lot longer than it looks on TV. If you’re really
interested in a fixer-upper, ask your agent to show you a mix of newer homes
and older homes. If you fall in love with an older home that needs a lot of
work, get some quotes from contractors before you buy so you know the real cost
of the renovations and see if you can work them into your budget.

Myth #5:
Your only upfront cost is your down payment.

Your down payment is big, but it isn’t the
only money you’ll spend during the home buying process. At closing, you’ll pay
your down payment, but you’ll also bring closing costs to the table. Closing
costs are typically anywhere from 2-4% of the total purchase price of the home.²
This amount includes the cost for items like homeowners insurance, title fees,
and more.

You’ll also need to pay for an inspection
before closing, which usually costs a few hundred dollars. This price will be
higher or lower based on the size of your new property. Your lender will also
require an appraisal. An appraiser will come in and inspect the home to
determine how much it’s worth. Depending on your lender, you may have to pay this
when the appraisal is conducted or it might be rolled into your closing costs.

Myth
#6: You need a high credit score to buy a house.

You don’t need perfect credit to buy the
perfect home. There are loans out there that buyers with lower credit scores can
qualify for. These are good options for people who have had credit issues in
the past, but some of them come with additional fees you will need to pay.
Speak to a few local lenders or mortgage brokers to talk through which options
might be best for you.

Myth #7: You can’t qualify for a
mortgage if you’re still paying off student loans.

While some buyers may feel more comfortable
paying off their existing debts before taking the leap into homeownership, it’s
not a requirement. When you’re applying for a mortgage, the lender takes a
close look at your debt-to-income ratio.³If you want to calculate
this on your own, add up all of your monthly debt payments and divide those by
your monthly income. When you’re lender does this, they’re trying to make sure that
you will be able to afford your monthly mortgage payments along with your other
existing payments. If your income is high enough to allow you to make all of
these payments each month, having a student loan will most likely not stop you
from getting a mortgage.

Myth
#8: You should base your budget on what your lender approves.

How much house you qualify for and how much
you can afford are two totally different numbers. When you prequalify for a
mortgage, your lender will look at your income, debt, assets, credit score, and
financial history to determine how much money you might qualify for.⁴For
some people, this number might be much higher than you thought because lenders
tend to approve for the highest amount they think you can afford. But that
doesn’t mean that’s how much you should borrow.

Instead, figure out how much house you can
actually afford. An online mortgage calculator can be a good
first step in determining this number. We recommend thinking about what you
want your monthly payment to be as a starting point. And remember to include
your principal, interest, taxes, and,
insurance. You should also think about ownership expenses that aren’t part of
your monthly payment, like HOA dues and maintenance.

Myth #9: It’s all about location.

You’ve heard the phrase. Location, location,
location is basically the real estate industry’s motto, but we’ll let you in on
a little known secret: It’s not always true. Yes, location is great to consider
when it comes to school districts and commute times, but you also need to think
about how the home will function for you and/or your family’s lifestyle. If a
family of five is choosing between a one bedroom condo in the bustling city
center and a 4-bedroom home out in the suburbs, the latter is probably the
best, most functional choice for them. Also, by buying in a less sought after
neighborhood, your property taxes will most likely be much lower!

Obviously, you might still want to choose an
area with great resale potential, and this is something that your agent can
speak to you about. They’re an expert in your city and are constantly
monitoring buying and selling trends.

Myth
#10: If you look hard enough, you’ll find a home that checks every box on your
wishlist.

You’ve seen that famous house hunting show.
And while we have our suspicions about how real it is, the one thing they get
right is that almost every buyer needs to compromise on something. Yes, the
perfect house that meets every item on your wishlist is probably out there, but
it’s also probably double or triple your budget.

A long wishlist can be a great starting point
for figuring out what you want and don’t want, but we recommend narrowing that
wishlist down to the top five things that are important to you in order of
priority. We also recommend noting on your wishlist what your absolute deal
breakers are, like “must have a yard for our dog,” and noting what you can live
without, like “heated bathroom floors.”

This is a great list to discuss when you first
start talking to an agent. A good real estate agent will be able to look at
your list and find properties that might work for you. By coming to that first
meeting with realistic expectations and knowledge about home buying rather than
a bunch of myths heard here and there, you’ll be able to start the process off
on the right foot and be in your new house in no time.

Top 10 Myths That Trip Up First-Time Home Buyers

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