If you feeling lost in navigating all the homebuyer myths and facts, just know that is completely normal and you are not alone!. We all know that buying a home is one of the most expensive and important financial decision you will make.
While I know that buying your first home is exciting, it can also feel overwhelming. From learning the legal jumbo, paperwork, budgeting homebuying costs, negotiations, and the endless scheduled home tours, it can be a lot to grasp all at once.
But one of the biggest challenges? Misinformation. Everyone you ask will have a different opinion. Even with the best intentions, friends and family could unintentionally give you misleading or outdated advice that could result in costly mistakes or missed opportunities. It can be hard to differentiate between homebuyer myths and facts.
So today, we will breakdown the top common homebuyer myths and facts, giving you actionable tips that relevant today—not 10 years ago.
Myth #1 – You Need a 20% Down Payment
The misconception is that people think it’s a requirement to be able to buy a house. While it’s nice and if you can do it great! The only benefits I find to putting 20% down is not having PMI insurance and a lower monthly mortgage payment. But personally, I’d rather keep more money on my pocket on the long run and here is how:
a) Consider applying for down payment assistance. There are many local and state programs that are available for first time homebuyers. Note that not all programs will require you to be a first time homebuyer.
b)The Fact: There are low down payment options like FHA, VA, or first-time buyer programs that require as little as 3%.
c) Consider all your options and ultimately decide what works for you. Things to keep in mind with a lower down payment:
Benefits:
- Buy a house sooner
- keep more cash at hand
- first time buyer assistance
Potential Downsides:
- You will have a higher mortgage monthly payment.
- Additionally you will have to pay PMI insurance increasing your overall monthly payment.
- You will likely end up paying more in interest over the life of the loan due to having a larger loan.
- Some lenders will offer better interest rates or waive fees for borrowers with higher down payment.
- You will have less immediate equity. Not really an issue but something to keep in mind.
Myth #2 – You Can’t Buy a Home With Student Loans
This would be one of the most common homebuyer myths and facts that is not well explained. While debt is definitely a drawback in many cases to get ahead, it’s not a defining factor to determine if you are eligible—in other words it doesn’t automatically disqualify you. Meaning? It’s not about how much debt in total you have but how much your overall debt to income ratio is monthly.—not just your existing debt.
Example Scenario:
Gross Monthly Income: $6,000
Monthly Debts:
-
Car loan: $400
-
Student loan: $250
-
Credit card minimums: $150
-
Proposed mortgage (PITI): $1,500
Step 1: Add up monthly debt payments
Total monthly debts (including proposed mortgage):
$400 (car) + $250 (student loan) + $150 (credit cards) + $1,500 (mortgage) = $2,300
Step 2: Divide by gross monthly income
DTI = Total monthly debts ÷ Gross monthly income
$2,300 ÷ $6,000 = 0.3833 or 38.33%
Step 3: Interpret the result
Most lenders prefer a DTI ratio below 43%, though some might allow up to 50% with strong credit.
In this case: 38.33% — This is generally considered acceptable for mortgage approval.
Myth #3 – You Should Buy the Most House You Can Afford
This just goes back to the saying—-just because you can doesn’t mean you should. Just because your credit card is $5000 doesn’t mean you should spend it all. You should only consider what you can reasonably afford. Make sure you have budgeted beyond the mortgage payment with the following including their respective percentages:
- repairs (1%–2% of home value annually)
- insurance (0.25%–0.5% of home value annually)
- maintenance (1%–2% of home value annually)
- utility bills (3%–6% of home value annually)
- Emergencies (1% of home value annually)
- Property taxes (0.5%–2.5% of home value annually)
The last thing you want to do is put yourself in a position to end up house poor. Living paycheck to paycheck and on the brinks of a financial disaster should anything happen.
As you come up with your spending budget, make sure your overall numbers leave you with some room to spare for these extras that are normally not accounted for. At the end, budget for long term comfort not just loan approval.
Myth #4 – You Don’t Need a Real Estate Agent
Unless you are a Real Estate agent yourself, I would say it’s wise to hire one. Just as I wouldn’t suggest you do your own taxes unless you are a tax preparer yourself. Why? Just like tax laws, real estate laws change with time. If you are not up to date with the latest news and trends DIY the process you could end up making costly mistakes or miss out on opportunities.
If you’re worried about the costs with working with an agent, fact is it usually paid by the seller and can protect your interests. Now the key to making the process as smooth as possible is to hire the right agent. Here are some of the benefits I found to working with an agent:
- Inspections: if they have an eye for investigation, they will look beyond the esthetics of the home and make you aware of the potential damages, areas to look into.
- Negotiations: after inspection, they can recommend negotiations for repairs, price, and extras you normally wouldn’t think are included.
- Paperwork: if there is anything more dreadful it’s the endless paperwork and process. Your agent will easily break down the terms and make sure you don’t miss anything —remember ignorance will not be a valid excuse during a legal process.
Myth #5 – You Should Wait for the “Perfect” Market
I love the phrase my realtor used “date the rate, marry the house” . If your concerned with the rate, just know those will always change and you could always refinance the house later. Now as far as housing prices, unfortunately those will rise every year regardless(unless a recession hits). Buy the house now while you can. The longer you wait, generally you will end up paying more for the house. There really is no “perfect time” markets shift constantly.
Most importantly, buy when YOU are ready. Not society pressure, peer pressure, comparison to someone else. This is your journey, so your path to homeownership will be different. So personal readiness over market timing is the most important thing to note.
Myth# 6: Pre-Approval and Pre-Qualified letters are the same
Fact? Nope they are not. Shocked? This came as a surprise to me as I often heard theses terms interchangeably. But it is important to note the key differences to these terms.
Pre Qualification: is an estimate of what you might be able to afford based on unverified information. A lot times this is usually a letter that comes from your bank letting you know you are pre qualified.
Pre Approval: is a formal commitment from a lender based on verified financial documents. Here the lender will pull your credit and give you an official letter to show to your realtor. This is actually the first step you should be taking before you go even see houses on the market.
Myth #7: You have to have perfect credit to buy a house
Now , I’m not downplaying the importance of having a good credit score as we all know that can determine interest rates and of course approval for the loan. However, an 800 score is not needed. According to Rocket Mortgage, a 620 is the average score, some lenders even approving as low as 500.
Of course always check requirements before applying. But don’t let that be a reason holding you back to pursue homeownership. Remember lenders look beyond credit scores and salary.
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Conclusion
I hope this run through of the top common homebuyer myths and facts served as a starting point to get better informed on your decision to homeownership.
It’s okay to feel unsure—education is power.
Always keep asking questions and seek facts before making any important financial decisions.
