Real estate is a complex industry, which is often filled with lots of misinformation and misconceptions. Let’s burst some real estate myths that simply don’t add up.
1. You Need Loads of Cash to Buy a Home
Not really. Unlike in the past when a 20% down payment was mandatory to be considered for a home mortgage, today you can buy a new home with as low as 5% to 10% down payment. Of course, the more you can pay as down payment the better for you, especially if you want to avoid PMI (private mortgage insurance).
2. Only a Down payment Is Required
Well, this may be practically true, but in reality, you need more than just a down payment. You need savings. The seller may agree to absorb the closing costs, but this is not always guaranteed.
In any case, you may have to spend a little more on repairs and replacements before moving in. It is important therefore to set aside some money for such eventualities. According to those in the know, have around $3,000 to meet potential repair costs and other exigencies.
3. You Should Run at the Sight of a Scary Basement
Every myth has some figment of truth, and this one does not deviate from the tradition. If the home has a serious foundation problem, this is not something you want to ignore since it can be very expensive to address.
However, minor issues such as a bit of moisture or bugs in the basement should not chase you away from a good deal. You might be surprised how much more welcoming it will look with a bit of cleaning and freshening.
4. You Don’t Need a School District If You Don’t Have Kids
Maybe you do. Homes located in school districts are easy to sell. You may not have kids but a home in a prestigious school district sells easily and at a better price.
5. Buying a Home Is the Best Investment Decision
Home values often appreciate, but not always. In fact, some studies have demonstrated that in certain areas you may be better off renting and putting your savings into an investment account. You will, however, need to be extremely disciplined and consistently apply your savings into an investment account.
6. It’s My House… I Can Do What I Want with It!
Not so fast! There are municipal regulations and other homeowners’ association stipulations you will have to contend with. For instance, permits and zoning vary from one area to another. On the other hand, each homeowner’s association have their own unique regulations that stipulate what you can and cannot do to your house.
In some cases, the regulations aside, a strategic home improvement can greatly enhance the value of your home. In others, the improvements may have no impact at all or even make it harder to sell your home. Go ahead and improve your home the way you want within the set stipulations, but remember a potential buyer may not think much about your improvements. Always check with your real estate agent to see if a home improvement might hinder your prospects.
7. You Don’t Need Home Insurance After Paying the Mortgage
There are good reasons most mortgages require homeowners to insure their homes against potential calamities. However, some homeowners stop paying for home insurance after completing their mortgage payment. The problem with this decision is they are not insured against potential hazards such as a fire outbreak or other natural disaster.
It might feel like you are pouring money into a hole when paying for insurance, but in the event of a disaster, you will thank high heavens you had the presence of mind to keep up with the insurance payments.
8. Buying a Home Requires Perfect Credit
A higher credit score will definitely help you get lower interest rates. However, having a poor credit score does not lock you out of a home. There are many options available to people with both good and poor credit scores. The trick is to keep searching until you find a lender who will consider your case. In the meantime, keep building your credit and savings.