Owning a home is likely the most significant financial commitment many will make in their lives. Beyond the thrill of homeownership, there are numerous steps to consider before securing that perfect dwelling. A home isn't just about money; it's about setting down roots, creating memories, and generating long-term wealth.
Unfortunately, myths around the mortgage process can deter potential homeowners. Here, we tackle eight widespread misconceptions.
Myth 1: Only those with flawless credit can buy a home. Contrary to belief, perfect credit isn't a must. While a credit score of 740+ offers prime rates, even those with scores around 620 can qualify. The FHA may even consider applicants with scores as low as 580. Lenders also evaluate factors like income, debt ratio, and overall credit history.
Myth 2: Current interest rates make buying a home unaffordable. While first-time buyers may be taken aback by today's 6-7% rates, especially when compared to historically low rates, these aren't unprecedented. Surprisingly, a 30-year mortgage at 7% could be more cost-effective than perennial renting.
Myth 3: Entrepreneurs can't get a mortgage. The shift towards entrepreneurship during the pandemic has birthed this myth. While inconsistent income might pose challenges, self-employed individuals aren't ineligible. Remember, lenders assess net income, not gross.
Myth 4: Mortgage approval is all about job history. Employment consistency matters, but there's more to the story. For instance, a recent graduate's degree relevant to their job can contribute to their employment history. Similarly, career shifts supported by relevant education are considered favorably.
Myth 5: Closing costs are all about the down payment. While down payments (typically 3-5%) are significant, other costs like lender fees, title charges, taxes, and appraisal fees also play a role. Many of these can fluctuate during the loan process, often decreasing from initial estimates.
Myth 6: 100% financing is exclusively for first-time buyers. Zero-down-payment loans aren't reserved solely for debut buyers. Various factors, including credit score and property location, determine eligibility. Moreover, homeowners aren't tied to their initial lender and can explore refinancing in the future.
Myth 7: Monthly mortgage calculations are too complex. Calculating monthly payments might seem daunting, but it's simpler than most think. A ballpark estimate? Multiply the property's sale price by 1%.
Myth 8: Texas' homestead laws don't benefit homeowners. Texas' stringent homestead laws notably protected many during both the 2008 recession and the COVID-19 pandemic. These laws offer multiple protections and benefits, including significant tax advantages.
Securing a home should be a joy, not an anxiety-ridden journey. By dispelling these myths, potential homeowners can approach the process with clarity and confidence.
I hope you have found this blog post super helpful. If there is anything else we can do for you, including helping you sell (or buy) a home, I would be honored to assist. I hope you have a great day/evening. Cheers, E + J.
We are so happy you found our little corner of the interwebs. We look forward to y'all reaching out to us. We love to answer questions and welcome them. Recently we created some local maps, and you can download those by clicking the image/link above. Below, you will find an index of some very helpful information to assist you in learning more about the Houston suburbs. If you are relocating to our neck of the woods, we hope you reach out to us, because we would love to help you by being your local realtor and friend. Thoughtfully written for you. Hugs, Jo.
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