Don't Let These Two Myths Stop You From Buying A Home

Many myths floating around out there are fairly harmless. However, misconceptions about purchasing a home could result in you missing out on opportunities, waiting longer than necessary to purchase a home, or stop you from buying on in the first place. Here are two commonly believed myths about the home buying process that you can safely ignore:

Myth #1- You Must Have a 20% Down Payment

One of the top home buying myths is you must put up a 20 percent down payment on a home in order to purchase it. This myth can be particularly harmful, especially since saving tens of thousands of dollars can take years to accomplish. Luckily, though, this isn't true at all.

Depending on the lender, you can get approved for a mortgage with as little as 3.5 percent down.  If your credit and income are good enough, you may even get away with paying zero down, though that's fairly rare. Regardless, you don't need as much money as you think to get a home.

Be aware, though, that putting down less than 20 percent of the home's purchase price does have its drawbacks. Namely, you will be required to obtain mortgage insurance. However, you only have to keep that insurance until the day the balance on your mortgage represents 80 percent of the home's value, i.e. you pay down 20 percent. At that time, you can cancel the mortgage if you want to.

Myth #2 – You Must Have Perfect Credit

Another myth that puts many people off of purchasing a home is that banks require applicants to have great credit to get approved for loans. This isn't true at all. In fact, you can have terrible credit and still land an affordable mortgage. It all depends on where you apply. For instance, you can get an FHA loan with a credit score as low as 500.

It should be noted, though, that the terms of your loan will typically get better the higher your credit score. People with scores in the 700 range generally qualify for lower interest rates, for example. So it's worth the effort to improve your credit before applying for a loan. However, don't let a bad credit score stop you. You can always refinance your loan to get a better rate at a later date when you have a higher credit score.

For help buying a home, contact local real estate brokers.