Buying a home is probably one of the biggest investments you’ll make in your lifetime, however, several misconceptions come along with being a homeowner. As DomiDocs is committed to helping you make the best homeowner decisions possible, here are a few of the most common homeowner myths dispelled.
Your Credit Needs to Be Perfect
While your credit rating needs to be the best it can be, it doesn’t need to hit the highest threshold to qualify for a mortgage. What’s a good credit score? Here’s the breakdown according to the consumer credit reporting agency, Equifax:
- 800+: excellent
- 740-799: very good
- 670-739: good
- 580-669: fair
- 579 and below: poor
Both VA and FHA loans require credit scores of 580 or higher, while conventional loans through a bank generally need a minimum credit score of 620. You can improve your credit by ensuring you’re paying bills on time and by paying off any high-interest pre-existing debt.
You Need a 20% Down Payment to Buy a Home
There’s a common myth about needing a down payment of 20% of the purchase price of your new home. In reality, you can buy a home with a down payment of just 3.5% of the purchase price through an FHA loan. If you are a veteran you can purchase a home using a VA loan without any down payment.
Once You’ve Got a Down Payment Saved, That’s All You Need
That’s great you can afford a down payment on a home! But you’ll also need money for all the extras homeownership requires. Research by Clever Real Estate noted these additional annual expenses when owning a home:
- closing costs – expect to pay from 2 to 5% of the home price
- emergency home maintenance fund – you should save 1 to 3% of your annual income
- home improvements – $6,649
- homeowner insurance – $1,228
- landscaping – hiring a gardener costs around $60 to $200 per hour; a landscaper runs $50 to $100 an hour
- maintenance/repairs – $2,676
- property taxes – $2,600
Stay organized by using the notes feature of DomiDocs to keep track of whatever may arise within your homeownership such as a to buy or a to-do list. You can also upload your home improvement receipts as having documented proof of upgrades and renovations will help to increase your home’s value if you decide to sell in the future.
Always Wait For Favorable Interest Rates Before Buying
While in theory, this sounds like a great idea, waiting for lower interest rates could in reality cost you the home of your dreams. If you’ve located a home you love, it’s a big risk to wait for interest rates to drop so it may be a better option to grab your forever home while you can and then refinance at a later point when interest rates are lower.
Buying is Always the Best Option
There are many pros and cons when it comes to the renting vs. buying scenario. On the outside, it seems to make perfect sense to buy a home as you’ll be paying off a mortgage rather than paying someone else’s. But it’s extremely important to note that the housing market is always in flux. Home values don’t always appreciate, so if you want to sell your home and prices start tanking, you may actually lose money on your investment. It comes down to your current financial situation and what’s affordable for you. You’ll also need to consider the energy, money, and time required to carry out maintenance and repairs continually when you own a home, are you prepared for the commitment? It’s simple to keep on top of regular household tasks and save money by reducing costly emergency repairs with our DomiDocs preloaded maintenance calendar that comes complete with handy alerts.
Buying a Fixer-Upper is the Way to Go
Many homes in need of repair and tender loving care are completely repairable, but others may not be such a great investment. If you know how to properly do the work yourself, a fixer-upper could be a great bargain. But homes in disarray can come with unforeseen costs that can quickly multiply. It could be something as simple as finding a non-functioning electrical socket you think can be switched out, only to find out a costly electrical upgrade is needed throughout the entire home. Not sure where to find a professional? Consult our DomiDocs list of trusted nationwide contractors to locate a pro near you.
Buying a New Home is the Way to Go
It’s the American dream to build your own home. And while this seems like the way to own a perfect house, new builds may not come without any issues including:
- common construction delays
- cracked concrete due to shrinkage
- dirty duct systems that weren’t cleaned properly after installation
- doors that may be crooked or have gaps
- improper appliance installation, plumbing hookups
- incorrect drainage and grading of the property
- missed painting spots
- separation in wood flooring
It’s easy to assume a new build will be defect-free, but it’s essential to conduct a final walkthrough inspection before signing off on your new home. Regular maintenance will be much easier on a new home but you’ll still need to do things like regularly cleaning the gutters and keeping your landscaping looking great.
Flipping and Selling Homes is Easy
No doubt we’ve all seen at least one episode of a house-flipping show on TV. For some, it can be a lucrative business, but for others, it could quickly become a nightmare if you find more repairs than you realized were needed. It’s a common scenario for new house flippers to find out they’re in way over their heads when it comes to carrying out remodeling on their own, which can be a costly mistake when following a house flipping budget. And contrary to popular belief, YouTube videos can’t teach you how to fix everything. Plus, you’ll need to ensure the renovations you’re carrying out aren’t going overboard as the selling price of the house still needs to remain within the current market listing prices to appeal to potential buyers. Learn how DomiDocs-GRN can reduce your homeownership costs and lower your home’s carbon footprint.
It’s Just a Starter Home, You’ll Upgrade Later
While the intention is to buy a smaller home to begin with, and later upgrade to a more desirable and suitable home, New York real estate broker Brian Ma said,
“Most homeowners don’t upgrade their home purchase, because doing so is cost-prohibitive.” After going through the home buying process once, Ma says many homebuyers don’t even consider upgrading to another home purchase.
Owning a Home Locks in Static Costs
When it comes to owning a home, rising costs are unfortunately a given. While some think buying a home locks in basic static costs, ongoing maintenance, repairs, and increasing property taxes are costly expenses no one looks forward to dealing with.
You Can Save on Taxes By Owning a Home
While it’s possible you’ll be able to save money on taxes, there’s no guarantee the savings will apply to your financial situation. CPA and founder of Money Done Right, Logan Allec said, “The new tax law passed in December 2017 nearly doubled the standard deduction for all taxpayers, making it even less likely that owning a home will benefit you tax-wise. For 2019, the standard deduction for a married couple filing jointly is $24,400. Unless the sum of a married couple’s itemized deductions—such as property taxes and mortgage interest— exceed $24,400, they will not benefit from those itemized deductions.”
If You Miss a Mortgage Payment, You’ll Lose Your Home
While you don’t want to do this, it may not be as bad as you think. Editor of REthority.com Andrew Healing says, “While missing a mortgage payment will likely hurt your credit score, banks will typically work with you to get back on track. Foreclosing on your home is inconvenient to banks, so they’d rather charge you a late fee than carry the burden of foreclosure.” DomiDocs’ HomeLock™ will protect your home not only from fraud but anything that can go wrong including missed payments, unpaid bills, or county misfiling’s. Watch our HomeLock™ video and sign up today!
You Can Do What You Want With Your Own Home
Within reason, this statement probably holds true. But the reality is, if you want to build a higher fence so you can avoid talking to an annoying neighbor or want to install an in-ground pool for your family to enjoy, you’ll need to adhere to local zoning laws and restrictions first. If you’re part of an HOA, there could be rules in place that restrict everything from landscaping, installing solar panels, and displaying holiday decorations on the exterior of your home, to how many vehicles you’re allowed to park on your property. If you’ve purchased a historic home, you’ll need to follow all the rules including those for choosing paint colors or replacing glass in one of your windows.
DomiDocs is committed to providing you functional tools designed to make your life as a homeowner even easier through our free home management platform where you can organize your documents, know the current market value of your home, and more!
For more information on home buying, read:
- 6 Crucial Tactics for First-Time Homebuyers
- DomiDocs’ New Homeowner Guide
- Refinancing Your Mortgage with Bad Credit
Author – Connie Motz