Dympna Fay-Hart
Serving Chicago Area Sellers & Buyers

(773) 230-3800

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6 Home Buying Myths Debunked

The more you know, the better decisions you will make.  

Here are 6 common home buying myths that, unfortunately, many people believe to be true.  Some of them were relevant many years ago, but today's marketplace has its own nuances and best practices, and the home buying process is constantly changing.

Remember that your real estate agent is an expert in the home buying process and can answer any questions you have. Don't hesitate to ask for explanations.

Myth #1:  You Need 20% Down Payment To Buy

There are lots of loan programs out there that require anywhere from 3% to 10% down.  As a matter of fact, the average down payment for all mortgage loans last year was 7-8%.  Most mortgage lenders require a down payment of at least 3%. FHA loans (mortgages insured by the Federal Housing Administration) require a down payment of at least 3.5%. Depending on your credit history, the type of dwelling and your reason for buying, the minimum down payment could be anywhere from 3% to 20%, or possibly even more for a second home or investment property purchase.

Myth #2:  You Need To Have Stellar Credit

There is no doubt that the better your credit score, the better loan rates and terms you will receive.  But, you don't need to have the best credit in order to qualify for a home mortgage.  Major lenders will now approve FHA mortgage applications for borrowers with FICO scores as low as 580. This marks a 60-point improvement from last year, when FHA lenders required 640 FICO scores or better to get approved. The program's 3.5% down payment minimum is among the most lenient for today's home buyers; and underwriting requirements on an FHA loan are flexible and forgiving.  FHA loans account for nearly one-quarter of all loans closed today.

Myth #3:  Pre-Qualification Is The Same As Pre-Approval

These two terms don’t mean the same thing. To get pre-qualified, you give your lender basic information about you, like your assets, income and debts, and authorization to pull a credit report.  With this basic information the lender can determine what kind of loan you can qualify for and estimate how much you would be eligible to borrow.  A pre-approval is when the lender has verified all the information you provided and you complete a mortgage application.  Once this is done, the lender will provide you with a pre-approval letter subject to the home appraisal and final verifications.  If you are purchasing a home in a fast-paced market where homes are selling very quickly, I highly recommend getting pre-approved before making any offers.  Your offer will be much stronger to a seller when you have a pre-approval in hand.  Sellers don't want to waste time with a buyer who may not be able to purchase.

Myth #4:  All Real Estate Agents Are The Same

Real Estate professionals are in the service business.  Some agents provide better service than others, have more expertise, are better negotiators, and are more knowledgeable about specific neighborhoods and areas.  When choosing a real estate agent to guide you through the home buying process, choose the agent who takes the time to listen to your wants and needs and provides you with the education and guidance you will need.  It is important that you trust your agent and are assured she/he is working in your best interest at all times. 

Myth #5:  The Seller Will Make Repairs Called For on The Home Inspection Report

Home repairs and replacements are completely negotiable, so depending on the circumstances, the seller may or may not agree to make any repairs.  This is one of the areas where 'flexibility' is key.  If you purchased the home at a great price because it needed a lot of repairs, then it's not likely that the seller will agree to more concessions.  Also, if the items were disclosed to you ahead of time, that may be another factor that affects whether or not the seller will agree to make any repairs.  Your agent will do the best to negotiate a win/win for you, but be prepared to make the repairs yourself or potentially walk away from the purchase.  Your purchase contract will define the parameters of responsibility when disputes arise regarding home inspection issues, and your agent will assure your understanding prior to presenting an offer.

Myth #6:  It Is Cheaper To Rent Than To Buy

In today’s market, rent prices have been increasing faster than home prices.  It depends on the area, but in many areas in Chicagoland, purchasing a home is cheaper than renting.  However, making the rent vs buy decision is highly personal, comes with a lot of responsibility, and should not be taken lightly. Renting comes with the flexibility of moving and doesn’t come with the cost of repairs and improvements, but owning comes with a potentially lifelong investment.  Many home buyers would rather pay their mortgage and build their own personal wealth than build the landlord's net worth by paying rent every month.  

Please don't hesitate to contact me with any questions you may have about buying a home in Chicago or the nearby suburbs.  I'm happy to help in any way that I can.