Some information out there is not entirely true
Taking the plunge from being a renter into homeownership involves some important steps but it may not be as out of reach as you think. Having ample cash on hand and a good credit score are essential but there are many myths to clear up about what you need for the process. Here are some items to set the record straight.
Homeownership equals debt
Some people think that taking on a mortgage means you will be incurring a lot of debt. While needing to pay your mortgage regularly may be true, homeownership also comes with some big advantages. As you pay your mortgage down every month you essentially will begin to build equity. This can almost function like a savings account in some ways. You can oftentimes pull out equity down the road and use it towards other things, or cash out when you sell. Owning a home and gaining equity is often a part of one’s retirement plans.
Credit score needs to be perfect
While it is true that the better your credit score, the easier it will be to secure a lower interest loan. However, there are mortgage programs that have lower credit and income requirements that you can take advantage of. It is worth noting that once you secure a home loan this can help you improve your credit ranking overtime as well.
20% Down is a must
Many people think this because if you put down less than 20% then you will have to pay private mortgage insurance or PMI on top of your regular payment. Many people do this and put as little as 5% down on some properties and just have to pay a small monthly fee until their home has gained value to have more than 20% equity in it. Ultimately it is a small price to pay for being able to own a home sooner than later.
Now is not the time to buy
If it is a buyer’s market or if rates are very low like they are nowadays, then it can be a great time to buy a home. If you are financially ready to make the purchase and if it is time to upgrade your home then these factors will play an important role in timing as well. Nobody has a crystal ball to know what is going to happen tomorrow, but if you are prepared now then it is the right time to make your move.
It will be hard to relocate
Some people think they don’t want to buy as they will be stuck in that home. First off, it is most often recommended to view a real estate purchase as at least a 3 year investment. This can help you weather any market shifts while you get a sense of your new space. Should the market remain strong, you can potentially sell much sooner than that or you can always consider renting out the home if necessary.