Avoid falling for common myths that keep people from buying a home.

Are mistaken beliefs getting in the way of you buying a home? Here are five common myths and what you really need to know about getting a home loan.

Myth 1: You must have 20% down.

It used to be that homeowners needed a down payment equal to 20% of the purchase price but that no longer holds true. Today’s home mortgages are flexible and buyers can get a home with low down payments or even 0% down.

Myth 2: New homes are maintenance-free.

Newly-built homes need less maintenance but they’re not maintenance-free. Even if you’re part of an HOA that handles lawn care you’ll still need to stay on top of basic upkeep—like replacing filters and burned out bulbs, checking for leaks from the plumbing and hot water heater and testing smoke and carbon monoxide detectors.

When buying a new home be sure your budget allows for upkeep. A general guideline is to have 1% to 3% of the purchase price on hand for repairs and maintenance. Appliances and other things can and do break down.

Also, don’t make the mistake of thinking all older homes mean more work. A well-maintained home updated with energy-efficient systems, insulation and roofing may require the same amount of upkeep as a newer home with the advantages of having mature landscaping and an established neighborhood.

Myth 3: You need perfect credit to get a home loan.

You can get a home loan even if your credit score isn’t the greatest. For example, FHA-backed loans are available to people with scores as low as 580. In making lending decisions, lenders look at your ability to repay the loan. Even if you have student loan debt or an auto loan, you can still get a mortgage if your debt-to-income ratio is within acceptable limits.

Myth 4: Find a home first then seek a loan.

For a smoother home buying process, line up your financing first, then find the house. When you get pre-approved for a mortgage you know exactly how much you can afford and can narrow your search to homes within your price range. Plus, mortgage pre-approval makes your offer stronger in the seller’s eyes compared to a buyer who must secure financing for the deal to go through.

Myth 5: It doesn’t matter where you get your home loan.

Who provides your mortgage makes a difference at every step of the way and affects how much you pay.

Banks are for-profit organizations so naturally they’re looking to maximize profits. Credit unions like Consumers are not-for-profit and their focus is on providing value for members. For home buyers, this means lower fees and rates will be available at a credit union.

Another consideration when choosing a lender is whether they are a national or local institution. With national banks, service may be impersonal, and decisions made far away. Local lenders live and work in the community where you do. They have in-depth knowledge of the local market and are more willing to work with you to overcome obstacles.

A national lender may also sell your loan after it’s complete. This means dealing with a company you don’t know as you pay off the loan. At Consumers, you can count on us at every step of your home-buying journey.

 

All loans subject to approval. Rates, terms, and conditions are subject to change may vary based on credit worthiness, qualifications, and collateral conditions.