Finally ready to make the transition to buying a home? That’s awesome, and in this exciting time you can be turning to friends and family for an insight into the process. However, there seems to be a circulation of misinformation spreading around, so we’re here to clear up a few myths.
The First Step is Searching For a Home
You know the saying, “Don’t put the cart before the horse,” well that’s important to remember when it comes to buying a home. You don’t want to start looking for a house until you have gotten to sit down with a lender and discuss what the bank will qualify you for. If you fall in love with a house that’s $250,000 and come to find out you’re only qualified for $200,000 you can get your hopes crushed and waste a lot of time. Don’t start the process on the wrong foot and make sure the numbers line up.
You Don’t Need A Real Estate Agent
For starts, when buying a home, 99% of the time the buyer’s agent gets paid by the sellers. That random 1% can be for odd circumstances. So you’re getting to use the services of a real estate agent for free. Having a real estate agent on your side means you’ll get to see homes that aren’t as readily available on public searches, you avoid outdated listings and scammers (there are lots of them), and you have protection when it comes to navigating the legalities of contracts and buying a home. Why wouldn’t you want an awesome negotiator working to ensure you get the best from the transaction? For FREE
You Can’t Buy A Home With Bad Credit
Fortunately for some, this is a myth. Lenders and banks come by the hundreds of thousands and all though there are a few loan options, a lot of lenders can work with credit scores in the mid 500’s. Get in touch with an agent to help you connect with the right lender who can help you potentially approved. There is a lot of factors that go into approvals, but your credit doesn’t have to be a sore thumb during the process. However, you will be doing yourself a favor if you connect with a credit repair specialist to at least get those numbers in the 600’s. A better score will lower you interest rate.
Your Down Payment Has to be 20%
Think you have to sell an arm and a leg to buy a home? Not at all! An FHA loan only requires 3.5% while a conventional only requires 5%. There are a lot of programs that can potentially help you with down payment assistance or be 0% down mortgage. USDA and VA loans are the most popular 0% down programs. If you qualify, this can take a big chunk off the amount of cash you have to bring to the closing table.
Down Payments Are The Only Upfront Cost
This is one of the biggest misconceptions. There is a lot of cost that goes into buying a home, and that includes upfront costs. One of the mandatory ones are a survey and appraisal. If you are getting a mortgage, the home will have to appraise for the purchase price. An appraisal can range from $400-$700 dollars. Aside from your down payment, you then have to pay for closing costs. And NO, they are not the same thing. Closing costs can range anywhere between 3-6% of the purchase price. In certain markets, this can be negotiated for seller’s to pay the buyer’s closing cost, by rolling them into the offer price. There are benefits to having the seller pay your closing cost. In some markets the homes are selling fast and asking for closing cost might make you lose the home.
Now that you have some knowledge to get the process started, get in touch with an agent who will help you get through the process as smoothly as possible.
Should I Buy a Smaller House to Make it Affordable
The size of home that you buy depends on your needs now and in the future. If you plan on needing more space in the next 3 to 4 years you might be better off buying a bigger home to begin with instead of buying a smaller one now and then going into a bigger home in 3 to 4 years. Also, if you like stocking up on groceries and buying when stuff is on sale, a larger kitchen with a pantry would be nice.
Working With an Agent
Some buyer’s like to look on their own and take there time to find the perfect home. If you take to long to find a home and the interest rates go up 1/2 %, you will lose about $11,000 buying power. Example a $200,000 home at 4% interest would be approx. $954.83 a month principal and interest. If the rate goes up 1/2% to 4.5% your payment would be $1,013.37 for a difference of $58.54. Therefore it is better to have a knowledgeable agent help you with the purchase of a home.
Homes for Sale in Sioux Falls Under $200,000.00