Five Persistent Real Estate Myths that Just Ain't True

Here are five myths that often keep potential buyers from dipping their feet into the home search process. They are labeled "myths" for a reason!

Myth #1: Credit Score Blues

While many mortgage programs do have credit score minimums, you might be surprised at those minimums. While the best rates are only available to those with great credit scores - and raising your score will affect how much you qualify for and your interest rate - you can, for example, potentially qualify for an FHA loan with a score of 500.

Myth #2: Renting is Better than Buying

While there are a few cities in the U.S., like Austin, Texas and San Jose, where renting is actually cheaper than buying, the advantages of homeowernship generally outweigh the costs of renting. There are a number of reasons for this, but to briefly summarize: 1. Home prices continue to rise, but rent has been growing even faster in the last year, with some areas experiencing 40 percent increases in rent, 2. The tax benefits of homeownership are not available to renters, 3. In many ways, you are paying yourself back with a mortgage rather than paying someone, 4. As prices rise, you gain equity (aka “wealth”). For example, last year, home price increases almost 20 percent. On a $500,000 home, that is a $100,000 increase in your personal wealth in one year! In fact, most investors agree that real estate is one of the best paths to wealth generation and, over time, one purchase can lead to another and start to create passive income that can snowball over time.

Myth #3: You Should Wait Until Spring to Buy

A lot of people like to wait until Spring or Summer to start their home search since more homes tend to be available in that season. However, particularly in Southern California, “winter” is a relative term and right now might be a good time to lock in interest rates that are expected to continue to inch up as the year continues. It is also true that less competition can provide opportunities to get better deals in the winter months (though that hasn’t necessarily been as true in 2022.

Myth #4: It’s Who You Know

Many people like to finance their home purchase through their current bank. While you should include them on the list, it is important to always price compare to find the best deal. Discounters can often provide better rates and specialized lenders can often work with you to create better terms overall (or allow you to qualify when major banks standards might make it difficult to impossible).

Myth #5: I Need 20% Down

One of the most persistent myth in real estate is that you need 20 percent of the total cost of your home to buy. I was just dispelling a friend of that misperception earlier today. It was true in the past, but is no longer the case, and the average buyer last season put down substantially less than that sum. Speak with a lender to see what programs you qualify for. You can easily get in a home for as little as 3.5 percent, or less! And, remember, while PMI (private mortgage insurance) is the bete noire of buyers, it is sometimes a powerful tool to let you get into a home with a much smaller down payment.

If you have any questions about any of these five myths, or any others about buying or selling real estate, feel free to give me a call or drop me a line.