To Buy A Home I Need Lots Of Money To Put Down

A common home buying misconception is the belief that when buying a home, a large amount of money is required to be put towards a down payment.  The most popular percentage that people believe is required for a down payment is 20%.  There are actually many ways that a home buyer can buy a home with little to no money down.

One of the most popular ways to buy a home with very little money down is a FHA, Federal Housing Administration, mortgage.  A FHA mortgage allows a buyer to put as little as 3.5% down towards a home.  Obviously 3.5% down is much different than believing you need to have 20% down to buy a home.

To Buy A Home All I Need Is The Down Payment

Even though a large amount of money is not required for a down payment on a home, another home buying misconception is the belief that the only money needed to buy a home is the down payment.  This is incorrect.

There are many costs that are associated with buying a home, many of which you may not be familiar with.  Some of the costs that you can expect when buying a home include;

  • Real estate taxes
  • Bank appraisal
  • Mortgage application
  • Underwriting fee
  • Attorney fee
  • Various inspection fees (ex; home inspection, radon test, septic inspection, etc…)
  • Mortgage insurance

The above costs are just some of the more common fees associated with buying a home.  There are many nationwide, statewide, and local home buyer programs and grants available for home buyers to help cover the other costs of purchasing a home.  Don’t fall for the common home buying misconception that the only money required to buy a home is the down payment, because it is incorrect.

To Buy A Home I Need To Have Perfect Credit

Perfect Credit Scores Are NOT A Requirement For Purchasing A Home

Perfect Credit Scores Are NOT A Requirement For Purchasing A Home

First and foremost, credit scores do have an impact on whether a buyer is able to buy a home or not.  There is a common home buying misconception however that you need to have a “perfect” credit score to buy a home.  There are several mortgage products available for home buyers that allow credit scores in the 620’s.

It’s important to understand that while you don’t need to have perfect credit to buy a home, having a lower credit score will impact a mortgage.  The biggest impact a lower credit score will have is the interest rate a buyer is able to secure.  The lower the credit score, the higher the risk for the lender, therefore the higher the interest rate.

Since mortgage rates are currently hovering at historic lows, there is a good chance that a buyer with a lower credit score is getting a better interest rate than a buyer who bought a home 10 years ago with perfect credit.

I Need To Find A Home Before Talking With A Bank Or Mortgage Company

One of the biggest home buying misconceptions that exists is the belief that finding a home before speaking with a mortgage company or bank is the correct order when buying a home.  It’s critical when buying a home, you discuss your financing options before looking at homes and get a mortgage pre-approval for many reasons.

Why is having a mortgage pre-approval important before looking at homes?

The number one reason to have a mortgage pre-approval before looking at homes is because a seller will require proof prior to accepting a purchase offer.  Depending on your local real estate market, not having a mortgage pre-approval can put you at a huge disadvantage if your real estate market is a sellers market.  Buying a home in a sellers market often means you will face competition from other buyers and not having a pre-approval is a great way to lose out on your dream home.

Other popular reasons to discuss your financing options with a bank or mortgage company before looking at homes include;

  • Understanding the costs associated with buying a home
  • Know that you are looking at homes that are within your comfortable budget
  • Make sure you’re getting the best interest rate and mortgage product

To Buy A Home It’s Not Important To Have A Real Estate Agent

Another popular home buying misconception is that when buying a home, it’s not important to have a real estate agent.  It is possible to buy a home without the assistance of a real estate agent, but why would you do such a thing?

First it’s important to understand that in the majority of situations, a buyer will not be responsible for paying their real estate agent.  Having a top-notch buyers agent when buying a home can make the process much easier and less stressful than not having a buyers agent.  It is important to remember when deciding on who to choose as a buyers agent, that all buyers agents are NOT the same.

It’s strongly recommended when deciding on a buyers agent that you know how to properly interview prospective buyers agents.  Also make sure you don’t select the first agent you speak with because they are your colleagues brother or sister.  Having a top-notch buyers agent can not only make the home buying process less stressful but also can give an advantage in a competitive sellers market.

Any Home I Buy Will Be Worth More Money In Future Years

It’s always difficult for a seller to hear from a real estate professional that the home they bought a few years ago has not increased in value.  A common home buying misconception is that any home that is bought will be worth more money in future years.

Belief That All Home Values Will Increase Is A Common Home Buying Misconception

Belief That All Home Values Will Increase Is A Common Home Buying Misconception

Every home is unique and has it’s own features, amenities, location, and desirability.  It’s possible when purchasing a home that a buyer is paying top market value for the property in a market that does not see lots of appreciation in home values.  If this same buyer is attempting to sell in a couple of years, it’s possible their home value may have remained the same or even decreased.

It’s important when purchasing a home that a buyer knows how to pick the neighborhood they are looking to buy in, but also has an understanding for the local real estate market.  If a buyer does not do their research, it’s possible they maybe disappointed when they find out their home has decreased in value.

Online Home Valuation Estimates Are Accurate

Another common home buying misconception is that online home value estimates are correct.  There is nothing more frustrating for a seller to receive a low ball offer on their home because a home value estimate was much lower than the listing price for their home.

There are many online websites that offer home buying tools for home buyers that are quality and useful.  One tool that is not helpful for home buyers are these online home value estimates.  In most cases online home value estimates are inaccurate.

One of the most popular websites that provides home value estimates is Zillow.  During a recent case study of Rochester, NY home sale prices versus Zillow’s “Zestimates” showed that almost 40% of the sale prices on a given day were $18,000 or more off of what the “Zestimate” called for.

It’s Not A Good Time To Buy A Home

Many home buyers believe the misconception that now is not a good time to buy a home.  In reality there are many reasons why buying a home now is actually a very good idea.

The most important reason why now is a great time to be buying a home is due to the historically low interest rates.  If interest rates were to increase as little as 1%, the number of home buyers who were able to buy a home would decrease significantly.  Other popular reasons to buy a home now and not believe this common home buying misconception include;

  • Property values are expected to increase
  • Cost of renting is increasing

Buying A Home Is A Quick & Easy Process

Buying a home can present many hurdles and pitfalls that need to be overcome throughout the process, therefore buying a home is not always a quick and easy process.  The majority of homes will take roughly 60 from contract date to closing date, depending on many factors.

The home buying process itself has many moving parts and several different parties involved.  Some of the most common reasons why the home buying process is not a quick and easy process include;

  • Title related issues
  • Instrument survey related issues
  • Mortgage conditions
  • Low home appraisal issues
  • Coordination of closing date with buyer, seller, and attorneys

I Should Start Low With A Purchase Offer To Leave Room For Negotiation

Many home buyers believe that their initial purchase offer should be much lower than the homes asking price.  This is a very common home buying misconception and can often lead to an irate seller.  There are certainly cases when a buyer is correct in offering a very low offer.

Knowing exactly how much a buyer should offer for a home is not easy.  There are many tips that buyers should be aware of though when deciding how much to offer a seller for their home.  It’s important that when deciding how much to offer for a home, you have done your research and homework before making that initial offer, as it maybe your only opportunity.

Final Thoughts

Believing the above home buying misconceptions can be harmful to a home buyer.  Whether these home buying misconceptions lead to a buyer not pursuing a home or it leads to an unsuccessful home buying experience, it’s important you’re aware of these misconceptions.

Other Top Home Buying Resources

If you’re buying a home in Rochester, NY, make sure you don’t believe the above home buying misconceptions.  A buyer who is aware of the above misconceptions will give them an advantage in the competitive Rochester, NY real estate market.  If you don’t have a buyers agent yet, contact me and I’d be happy to discuss your housing needs with you and interview for the opportunity to be your buyers agent!

n this post, we’ll look at five common home seller misconceptions and we’ll set the record straight on each!

1. Pricing high will leave room for negotiation.

Overpricing your house is always a bad idea. 

Buyer’s agents know the market, and they can spot an overpriced listing from a mile away. When buyer’s agents see an overpriced listing, they assume the seller is either 1) unreasonable, or 2) not serious about selling. Either way, agents don’t want to waste their time, or their buyers’ time, touring the house and making an offer they think will be rejected.

So an overpriced house will sit on the market until the price is reduced. And by that time, the excitement over the new listing has worn off. Even worse, buyers might see the reduction and think the price had to be reduced because of a problem with the house.

Always price your house fairly and let the market do its job.

2. The real estate agent that recommends the highest list price is the best agent.

Savvy sellers interview multiple real estate agents before choosing which agent will list their house. And the savviest sellers select the agent they feel can actually get the house sold; not just the agent that recommends the highest list price. 

Unscrupulous agents may exaggerate the list price in the hopes of winning your listing. But as we just discussed, overpricing is never a good idea. 

Instead of hiring a real estate agent that promises you the moon, hire an agent with the integrity to be honest with you.

3. You should get an offer from the open house.

Here’s an open industry secret: open houses aren’t as effective as most people think. 

Agents hold open houses because sellers expect them to. And because it’s an opportunity for the agent to meet more people and pass out business cards.

But open houses mostly bring out curious neighbors and bored lookers. Serious buyers make appointments to see houses. 

So don’t be discouraged if the open house doesn’t produce an offer. Your agent is actively marketing the house in other ways so serious buyers can schedule a time to tour it.

4. Buyers will look past the clutter.

Buyers should be looking for good bones, right? Why would they be concerned about your furniture, your knick-knacks, or your paint colors?

While that’s a logical point of view, buyers use just as much emotion as logic in their home buying decision. They are more drawn to homes that feel good. 

Clutter and too much furniture can make the house feel small and cramped. And unexpected paint colors distract from the good bones. 

Make the buyer’s decision easier by decluttering, deep cleaning, and painting if necessary so the house feels fresh and inviting.

5. You can save money by cutting out the real estate agent.

It may be tempting to cut out the real estate agent to avoid paying the commission, but study after study has shown this to be a big mistake.

First, if your buyers have an agent, you’ll still need to pay the real estate agent fees for that agent (and why wouldn’t they want an agent when it costs them nothing?). So you only stand to save 2-3 percent by cutting out the listing agent and what will skipping out on the listing agent cost you?  

Sure, you can list the house for sale online yourself. But that’s only reaching a small percentage of serious buyers. Real estate agents list your home in multiple locations, actively promote your house via industry channels, and market your house to buyer’s agents, who get excited to show their clients the listing.

And how much is your time worth? Do you want to spend countless hours marketing your home, arranging showings, reading up on real estate law, navigating the mountain of paperwork, and dealing with the escrow officers and title reps?

But more than any of that, studies have proven that homes listed by professional real estate agents sell for more money that those listed by owner. You might save on the agent’s commission, but you’ll lose when your house sells for less.

Don’t give in to these common home seller misconceptions. Hire a real estate agent to guide you smoothly through the home selling process.

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