Buying a home after renting for years can seem like a scary proposition. After all, most homebuyers end up locking themselves into a 30-year financial commitment with a bank—a relationship that lasts longer than some marriages!
But many fears are overblown and often downright wrong, as Realtor.com notes in a recent article. Some situations “that may seem like roadblocks are actually not as daunting as they appear,” it reports.
The website lists the following home buying myths:
You will take on “heavy” debt: Yes, buying a home involves acquiring debt for most. But compared to renting, a loan has several advantages: As you pay off your mortgage, you build equity that you don’t create while renting. Also, you can trim the time of the financial commitment by making bi-monthly payments. And finally, current interest rates are historically low, meaning your payments will be lower than otherwise—and far less scary.
You need a 20% down payment, at minimum: While many buyers assume you must put 20% down, that’s generally to avoid paying private mortgage insurance (PMI). But once you reach 20% equity in the home, you can eliminate the PMI.
Also, other options to a 20% down payment exist, including 0% down for Veterans Affairs loans and 5% for some conventional loans.
You need a perfect credit score: Although a higher credit score helps when looking for a lender, loans insured by the Federal Housing Administration (FHA) have lower credit and income requirements than most conventional loans. Also, FHA lenders can counsel you on how to improve your credit score to obtain the right loan for your financial situation.
You’ll be stuck in this home forever: It’s a good idea to plan on staying in the home a minimum of three years. That way, you can survive any market swings, should they occur. But selling is always an option, if necessary, or you can consider renting the home. “There is always a way out of a real estate asset,” says one expert.
You should wait for a better time to buy: You can’t know what the future will bring, so “don’t let the fear of buying at the ‘wrong time’ stop you from moving forward,” notes Realtor.com. If you stay within your means and consider contingency plans should the market shift, there’s really no bad time to buy a home.