Homebuying Myths

10-7 researchIf you’re looking at buying a home, you’ve probably experienced a glut of information. With the Internet, advice from well-meaning family and friends, and advertisements, it can be easy to hear mixed messages about buying a home. Here are a few myths and misconceptions you may have heard.

A large downpayment is the key to getting into a home.

Even if you can make a full 20% downpayment (which is very difficult for most moderate-income buyers), your credit still needs to be in good shape to purchase a home. Lending requirements have become stricter as a result of the consumer protection laws put in place after the housing bubble burst and the foreclosure crisis hit. Having good credit shows your lender that you live up to your financial commitments and can make your mortgage payments. Also, low downpayment programs make it possible to get into a home without the large upfront cost of a full 20% downpayment.

Owning is cheaper than renting.

This one is tricky. With lower home prices and lower mortgage interest rates, a monthly mortgage payment can be the same or lower as a rent payment. But make sure to consider property taxes, repairs, and other costs when doing a cost comparison. With those factors added in, it does actually cost more to own (the green line in the chart below shows ownership costs; the blue line is the median gross rent for a three-bedroom apartment). However, owning does give you more bang for your buck since you are building equity.  Owning a home also can make you eligible for additional tax breaks and credits, such as the Homebuyer Tax Credit.

Rental v. Ownership Cost Comparison

Data compiled from various sources and analyzed by New Hampshire Housing

You will find the “perfect” home.

Be prepared to use your imagination and make some compromises. When you look at homes, keep in mind that you can budget to gradually update and customize to suit your tastes.  Also, almost 40% of New Hampshire current housing stock is more than forty years old. This isn’t to say that there aren’t good quality homes to fit buyers’ needs. Some just may need updates; others could require substantial repairs. If you are looking at buying a fixer-upper, there are programs to help. If an inspection reveals that major repairs are needed, you can negotiate with the seller on the price.

If your credit isn’t spotless now, there is no way you will be able to get into a home.

It is true that lending requirements have become stricter, and rebuilding your credit takes time, discipline, and patience. However, your credit score is within your control, and you have the power to improve it. There are a variety of free resources to help you rebuild your credit. Talking to a HUD-approved Housing Counseling Agency for credit and budget counseling can be helpful. Find Financial Freedom is an online course you can take that helps you set up savings goals and track your budget. With a little effort today, you may be surprised by what you can accomplish financially in just a few years!

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