Buying a first home is an exciting event in your life, but one that must be approached with caution. A home is a major investment, and you want to make sure of several things before you finalize payment on a new house or condo. Among them are these common myths about buying a home. Make sure that you are not falling prey to one of them before investing in your first house.
30 Year Fixed Mortgages Are Usually the Best
This may be the case if you plan to live in your new home for 30 years or more, but many people have aspirations to move before that time is up. If you are planning to live in your new home for only five to ten years, a seven or ten year mortgage can help shave a lot of interest off the total cost.
Buying Is Always Preferable to Renting
Buying is preferable if you are willing to make a significant, long-term commitment to your home, but not if it means missing out on opportunities like a job in a different city.
One of the biggest values of renting is flexibility, so make sure that you are ready to give that up before buying a home.
A 20 Percent Down Payment
A 20 percent down payment is ideal but not everyone – especially first-time buyers – can afford it. Consider putting down a smaller down payment, and then making up the difference with private mortgage insurance until you have enough home equity. Some programs require no down payment at all for qualifying buyers and properties.
An Affordable Mortgage Rate is 36 Percent of Your Income
Most lenders will give this figure to home buyers as if it is a universal fact. However, only you know exactly what you can spend on mortgage payments. Track your spending habits before committing to this interest rate, and make sure you have a fairly large monetary cushion in case of emergencies.
You Need to Make the Whole Down Payment Yourself
If you can’t scrape together the full the amount needed for a down payment, there are several valuable resources available to you. You can withdraw from your IRA towards the purchase of a home, borrow the money from family which allows them to write it off on their taxes, or take advantage of one of the many government or private programs that offer assistance to first-time buyers.
Educate yourself on the home buying process before you commit to buying a new home.
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