Don't Believe These 4 Myths About Buying a Home
Maybe you’re thinking about buying your first house but you’re not sure if you’re ready. Everyone you talk to has a different story and it’s more than a little confusing. Whether you are seriously considering buying or just weighing the pros and cons, it’s best to get the facts straight.
Here are 4 myths about buying a home:
You gotta have a large down payment
You might think that you need a zillion dollars in the bank to qualify for a mortgage but that’s not the really the case. Most banks require only 5% down payment for a first-time home buyer here in Canada. That means if you buy something modestly priced, you can do so for far less than you probably imagined.
If you buy a condo for $250,000, you need $12,500 for a down payment. While this might seem like a lot, it would only take a couple years to save that up with a good savings plan ($520 every month for 24 months or $350 for 36 months). Buy a second-hand car outright and own a condo instead of a crappy car loan in a few years.
Perfect credit score is a must
Buying a house can be a big step if you’ve taken a couple of hits to your credit. However, it’s one of the biggest myths about buying a home that says you need to have perfect credit. Most lenders appreciate that people might have a couple of mistakes in their past and won’t bat an eyelash at a few little mishaps. As credit scores run between 350 and 850, most lenders consider you a fairly safe bet if you score over 680.
Anything under 600 is considered higher risk and you might have to jump through more hoops to qualify for a loan. The thing to remember is that every lender has different guidelines. Shop your application around to get the best rate.
Fixed-rate mortgages are the coolest
There’s a big fear that getting a short-term fixed mortgaged, or even an adjustable-rate mortgage, will end up costing someone big money because interest rates fluctuate. But that’s not really accurate.
Fixed-rate mortgages can be a good thing, but a lot depends on your personal circumstances. If you are only planning on owning the house for five or six years, getting a 30-year fixed-rate mortgage might be overkill.
When you’re ready to buy a house, it’s important to consider how long you want to be in it. Just remember that longer-term loans are going to be subject to higher interest rates. If you’re only in the house for a few years, go with a shorter-term mortgage and save some cash.
Location is everything
Sometimes it’s hard to think big picture when you’re buying a house. Of course you want the best house in the best neighbourhood. But don’t forget that there can be hidden gems anywhere – if you’re willing to look.
If you look in neighbourhoods that haven’t reached their full potential yet, you could net a great property for a fraction of the cost. If the community still has a few issues to work through, get good home insurance to cover yourself for theft and vandalism.
Once you move beyond these myths about buying a home, you can get the best home for your money.