Buying a home is a major milestone in one’s life, and homeownership itself is both stressful and rewarding for a thousand different reasons. As real estate agents, we’re pretty familiar with (and partial to) the many benefits of owning a home. This, after all, is how we build equity and generational wealth (even if it’s become increasingly more difficult to do so in recent years).
But homeownership is also plagued by a lot of myths and misconceptions.
From the belief that you need a perfect credit score to buy, to the idea that renting is always the cheaper option, many first-time home buyers (and even seasoned homeowners) can be misled by the rhetoric. So we’re here to debunk a few of the most widespread myths about buying and owning a home. We just want to help you make the most informed decisions possible as you navigate the market, so we can work together to get you home.
Myth #1: Renting is Always Cheaper than Buying
Reality: Currently, this one is up for debate, particularly in some bigger cities on the map, and depending on your personal circumstances. Monthly payments in some places could be comparable to—or even lower than—rent, but current rates and home prices here in Utah are on the high end. Broadly speaking, renting is a cost effective option in the short term, particularly when factoring in high mortgage rates and the upfront costs of purchasing a home. But keep in mind that “cheaper” is a relative term: if you’re thinking about the long game, purchasing a home enables you to build equity over time as you pay down the mortgage with that monthly check.
Myth #2: You Need a 20% Down Payment to Buy a Home
Reality: This is a common belief that is, quite frankly, untrue. While many buyers can (and do) put a substantial down payment on their home (which can bring down monthly payments), 20% is not a requirement. There are various loan options available, and many of them require far less—some as low as 3%, and a few that require no down payment at all for eligible buyers. Your lender will help with this!
Myth #3: All Lenders Offer the Same Rates
Reality: Not true at all—we highly suggest you shop around! There are multiple types of lenders, as well as loan products, that will affect your rate, and different lenders will have varying internal criteria, risk tolerance, and business models. Getting quotes from a few lenders is a good start, but don’t forget to check for fees, terms, discount points, or promotions for different loan programs. (Bonus tip: Don’t simply choose the lowest rate—there’s a lot to consider. Your agent can help!)
Myth #4: You’ll Lose Money if You Sell Your Home Too Soon After Buying
Reality: While it’s true that there are significant costs (capital gains taxes, closing costs, mortgage prepayment penalties, etc.) associated with this, it is possible to sell for a profit within the first year of ownership, particularly if the market appreciates and the property is well-maintained. That said, it’s generally not advisable to sell too quickly, unless personal circumstances require it. We suggest chatting with an agent to discuss your options and determine the best course of action.
Myth #5: Your Credit Score Needs to Be Excellent
Reality: While a great credit score is certainly helpful when buying a home, there may be some flexibility, depending on the type of loan you get and the other factors that lenders consider, such as your debt-to-income ratio, savings, employment history, and down payment. Conventional loans typically require a score of 620 or higher, but others may have some wiggle room. All told, you can still find ways to purchase with fair or even poor credit, but you’ll have to explore loan programs and be prepared to for higher interest rates or a bigger down payment.
Myth #6: It’s Smarter to Find a Fixer-Upper
Reality: Buying a fixer-upper can be a good opportunity to build equity. Plus, it means you can customize a home to your liking and purchase at a lower price point (thereby saving a lot on up-front costs). For those equal to the task of renovating, we get the appeal. That said, there are plenty of risks that come with this option too. Financing issues, time commitments, unexpected costs, stress, unforeseen delays, or hidden issues not found in the inspection are all high on the list of possibilities when you purchase a fixer-upper, and it’s not uncommon for costs to add up to more than a turnkey home in the long run. Know your limits before you dive into this one.
Myth #7: You Don’t Really Need an Agent to Buy
Reality: Do you have to get a real-estate agent to buy a home? No. But unless you are VERY familiar with the complexities of the process (contractually, logistically, etc.), we highly suggest it. We’re here to help: we’ve got experience with everything from choosing a lender and finding trusted appraisers or contractors to negotiating with sellers and ensuring that deadlines are met and every last i is dotted and t is crossed. This is likely the biggest purchase you'll ever make…bring an expert to the table.
Homeworks Property Lab, 66 Exchange Pl., SLC P: 801.810.8696
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