Homes are always a good investment. No matter how much you may want to, or how much you can afford, you can’t buy a home without first buying into the idea that owning your own place is the right choice for you.
Having your own place is important whether you’re a solo adult or in a relationship. You should be able to make decisions about where and when to live based on your personal priorities and not on what others think. But even though buying a home has many benefits, it can also bring with it its fair share of risks if you’re not careful.
Here are some of the top myths about buying a home—and why “screwing up” isn’t an option:
Buying a Home Is Only for Rich People
This one’s a no-brainer. Yes, it’s true: people with higher incomes have a leg up when it comes to buying a home. However, there are a few factors that will impact anyone’s ability to buy a home.
For one, a credit score is key for most mortgage lenders. The higher your credit score, the easier it will be for you to get approved for a mortgage. The second factor is your liquid assets. If you start to struggle to make your mortgage payments, you’ll likely lose your house.
So, while there are certainly wealthy people who can afford a larger house than others, the average person can’t. And last but not least, you want to make sure you have a decent savings account as well as a large enough investment portfolio to help cushion any mounting mortgage payments.
It’s Too Risky
This myth comes down to two things: price and risk. All it takes is a bad market crash and you could lose everything. But there are a few risks you have to take into consideration when buying a home: the chance of interest rate increases, the risk of foreclosure, and the risk of investing a high amount of time and money into a house that may or may not appreciate in value.
However, the latter two aren’t as big of a risk in today’s market as they were back in the day. Yes, interest rates have gone up over the years, but they’ve also gone down and been higher in the past. Pampered homebuyers can also put a huge burden on the housing market. If you’re a family that needs the house to stay put, Pampered Buyers may be better off renting.
You Can’t Afford a Mortgage
While it’s true that many homebuyers take out a mortgage, it only makes sense that if you want to buy a home, you should be able to afford it.
The mortgage industry is cash-generating, after all, and banks make a significant profit on home loans. But as long as you have a decent credit score and can make payments on time, a mortgage is actually a favorable investment.
When you buy a home and then put it on the market again, you’re actually refinancing the mortgage. This means you’re paying less money up-front for a home that, over the long haul, will appreciate in value. And if you’re able to get a home loan with low interest, your monthly payment will be lower and will provide you with more cash flow. So, even though it’s not a good investment to mortgage your money, it is to refinance.
Getting a Mortgage Is the Only Way to Buy a Home
This one is almost too simple to be true. But it’s also the number one myth about buying a home. While it’s true that you can’t buy a home with a mortgage loan that you can’t pay back, a home loan is actually a better deal than a cash purchase.
The home loan provides you with a lower interest rate and longer-term interest, which can save you money in the long run. But it doesn’t pay off the mortgage loan until 2031 when you’re celebrating your 100th birthday. Even then, you’ll owe nothing. This is a good deal if you’re someone who wants to have equity in their home for years to come.
Credit and Debit Cards Are the Only Way to Get Your Loan Approved
Yes, of course, you should use a credit card when you can. But it doesn’t mean that you have to. You can use cash or a debit card to make purchases at stores or at restaurants or at a hotel when you’re traveling.
There are a few things to keep in mind, though. For one, you don’t want to use your credit card on a regular basis for high-ticket items. This can wind up adding stress to your credit score. Plus, if you have a bad credit history, it can be hard to get a loan. Plus, if something goes wrong, like you miss a payment or have an emergency, you could end up in a jam. Instead of using a credit card, use cash or a debit card when you can.
Even with Good Credit, You Still Can’t Afford to Buy a home
You may have heard that “even with good credit, you can’t afford a home” before. Well, that’s because it’s true! Even though your credit score will be higher than it was when you applied for your loan, the amount of your loan will have gone up by the time you get your mortgage.
So, at the end of the day, your monthly payment will be higher too. You should determine how much you can comfortably afford before you start shopping for a home. Yes, you can pay off your credit card in full, but what’s the point if you don’t have the money to make the payment? And, anyway, you want to avoid adding interest to your credit score.
How to Avoid the Big 6 Myths About Buying a Home
It’s easy enough to pick a house out of the catalog and start looking, but how do you decide where to begin? Weigh your priorities and jot down your goals.
Next, take your time. Don’t just click “buy” and move on with your life. Take your time talking to real estate agents and lenders, and don’t be afraid to ask questions. Once you’ve got a good sense of where you are with the house hunt, make an informed decision.
Don’t make rash decisions based on emotions and don’t be afraid to get your questions answered by an expert. When you buy a home, you’re investing in the future, so make an informed decision based on facts, and don’t be afraid to ask questions.