When someone’s in the market for a home they invariably turn to friends and family for advice. But while those people are only trying to be helpful, they often provide incorrect advice based on the many common falsehoods people hold to be true about the real estate market. Here’s a few myths you need to set straight with your clients.
1. The down payment is the only upfront cost to worry about
Simply not true. Besides the down payment, buyers must also take into account several other expenses, including fees, inspection costs, taxes, insurance, credit reports and more. The closing costs alone can be anywhere from 3 to 6 percent of the purchase price, but the exact price will depend on which state you’re living in.
2. You don’t need to get pre-approved
Lots of people start looking around at homes in a casual manner, before they’ve been pre-approved for a mortgage. Unfortunately, while it seems harmless enough, it’s not a good idea to set yourself up for disappointment. It also might not be too bright an idea to waste time looking at cheaper homes if you can afford one that’s substantially more expensive.
“A buyer might be viewing homes that are in a higher or lower price range than what they are qualified for,” said Connie Antoniou, a broker associate in Barrington, Ill., to Realtor.com. As such, it always makes sense to get pre-approved before one starts looking around – that way your clients will know their budget and won’t waste time looking at homes beyond their price range.
3. You need a 20 percent down payment
Simply not true. The 20 percent down is the minimum a borrower needs to get out of paying for private mortgage insurance, but it isn’t a requirement to actually land a mortgage. Indeed, most lenders will accept as little as five percent down, and some buyers have even qualified with just 3.5 percent down when applying for a Federal Housing Administration loan. There are also many down payment assistance options available to consumers, for those who don’t have much savings.
4. If you don’t have kids, schools don’t matter
Until you want to sell up, that is. The fact is, the neighborhood you live in has a direct impact on your property’s value, and the quality of the schools in your area is a big determining factor on the ‘quality’ of your neighborhood. When the time comes and you want to sell, a lot of prospective buyers will be looking at the state of nearby schools too, and if the schools aren’t up to standard that will put a lot of them off.
Check out some more home buying myths in this article over at Realtor.com.