Misconceptions in Home Buying
Many people dream of home ownership. Unfortunately, a number of myths seem to persist year after year. Recognizing at least these five myths may help you finally become a homeowner.
Myth #1 – Buying Is Always Better than Renting
Over the long run, owning a home does make a lot of financial sense. However, if you see yourself only occupying a home for a couple of years, then you may be better off paying rent. That’s because real estate market values can change significantly in a short amount of time. You may actually see your home’s value go down for a period of a year or two, and that is bad news if you’re hoping to turn a profit. On average, you’d have to spend between five and seven years in a home just to break even when you sell. If you’re not going to be in that home for that long or even longer, then renting could be a safer alternative.
Myth #2 – As Long as Total Debt Payments Are Less Than 36 Percent of Your Income, You Can Afford a Mortgage
Lenders like to use the 36 percent rule to determine whether or not to finance a home purchase. However, borrowers must ultimately decide how much they can afford to pay. The best way to figure out what works for you is to try saving toward a down payment every month. Set aside an amount that would be equal to your probable mortgage payment when combined with what you’re paying in rent now. Adjust up or down until the amount feels comfortable for you. Then, you can target your home search to properties that will keep you in that range for monthly payments.
Myth #3 – A 30-Year Mortgage Is Always the Best Deal and Will Always Give You the Lowest Interest Rate
Here’s another time when the number of years you plan to spend in the home may be the most important determining factor. Thirty-year mortgages do tend to have fairly competitive rates, but they are probably high when compared to a mortgage that has a fixed rate for five or seven years and fluctuates after that. If you’ll only be in the home for that many years, this can save you thousands of dollars.
Myth #4 – Mortgage Interest Gives You a Bigger Tax Refund
It is possible to claim mortgage interest paid on the itemized deductions for your annual tax return. However, this doesn’t mean getting a bigger refund. With mortgage loan rates being at historic lows, most people just don’t pay enough in interest to exceed the standard deduction.
Myth #5 – A 20 Percent Down Payment Is a Necessity
Putting down at least a 20 percent down payment is ideal, but not always attainable. Depending upon the loan options you qualify for, you may be able to get a no or low down payment mortgage. The trade-off is that you’ll have to pay private mortgage insurance until you have sufficient equity in the home.
Let Waypointe Realty help you sort the myths from the facts when it comes to buying a home. Our expert Realtors put home ownership easily within reach. Contact us today or start taking a look at the newest homes available near you.