4 Common Myths About Home Buying

Source: TaxCredits.netThe Joint Center for Housing Studies at Harvard University recently completed a study which offers some compelling insight why many renters are hesitant to buy a home.

Financial constraints, of course, were a more common response than perceived lifestyle benefits from renting. Some of the common financial concerns the survey uncovered were, in actuality, misconceptions about the state of the real estate industry. Here are the top 4 home buying myths.

1. I can’t afford a home right now.

Over 50% of renters consider this to be the biggest hurdle. This common assumption seems to be linked directly with some major misunderstandings of what is actually required to purchase a home.

The down payment is one of the biggest misconceptions in this respect. A recent survey unveiled that an astounding 44% of respondents believed that a 20% down payment is required. In reality, there are a good deal of mortgages available with as little as 5% down (and even 3% in some conditions!)

In the same survey, 30% of respondents also believed that individuals with perceived “high incomes” are the ones who can obtain a mortgage. In reality, moderate income families have access to a good amount of programs (like the FHA program) which help families buy their own home.

2. My credit isn’t good enough to get a mortgage.

64% of the survey respondents above believed that they must have a “very good” credit score in order to buy a home. Actually, the average credit score for closed loans has dropped 24 points in the last two years. If you’re curious where your credit score stands, check out this page.

3. Now isn’t a good time to buy a home.

This is a difficult category to determine, especially in terms of financial situations. Many renters forget to evaluate not only the price of a home, but also the projected mortgage interest rate for the property. In other words, the number you see on the home is less important in terms of affordability, as your monthly mortgage payments will determine your financial ability to pay for the home in the long term.

Mortgage interest rates are very low, at present. However, Freddie Mac recently projected that mortgage rates will very likely be as much as one full point higher by this time next year. This, coupled with the recent prediction from 100 experts that house values will increase almost 20% between now and 2018, indicates that now really is an optimal time to get on the market.

We believe the shift is toward a buyer's market as we speak, but there's no telling how long the current rates will hold, and how far the pendulum will swing.  

4. Renting is cheaper than buying.

This is a big myth which keeps living on. And on. And on.

Buying is actually dramatically cheaper than renting. Here’s what Trulia said in a recent report:

“Homeownership remains cheaper than renting nationally and in all of the 100 largest metro areas. In fact, buying is 38% cheaper than renting now, compared with 35% cheaper than renting one year ago.”

The bottom line?

Regardless of your situation, it will be beneficial to talk through your thoughts with a trained professional in the field. There is a good chance you will be pleasantly surprised about your ability to buy a home.

Real Group Real Estate

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