10 Common Home Buying Myths

1. Buying is always better than renting:  This depends largely on the price of the home and how long you stay in it.  It generally takes 5-7 years and sometimes longer just to break even with the costs of buying, owning and selling a home.  Along with this, you will want to keep your home long enough to ride out any dips in the real estate market.
2. Real Estate is a good growth investment:  Most growth you see in home prices comes from inflation. Some housing markets grow better than others and some take bigger dips than others.  What makes them good investments is the ability to lock in your housing costs or rent it out for income, the opportunity to add value through improvements and the power of leverage (if you put $20k down on a $100k property that appreciates 3%, you earned a 15% return on that $20k).
3. A 30-year fixed mortgage is always the best deal:  If you plan to keep your home for 30 years that could be true, but if you intend to sell your home in 5-7 years, then a 7-year fixed rate could be a better solution because the longer the rate is fixed for, the higher your interest rate will be.
4. Always choose the mortgage lender with the lowest interest rate:  Interest rate and cost is always a factor but differences in fees may matter more.  In addition, the reputation and reliability of your lender could mean the difference between getting your dream home and losing it to another buyer.  Along with this, you'll want someone who can work well with your real estate agent.
5. You can afford a mortgage payment as long as total debt payments are less than 36% of your income:  Although the 36% rule may be what lender use, you should track your actual spending and then see how much more you can really afford to pay towards a home. Furthermore, you should be saving at least that much towards your down payment to verify if you can really do without that income.
6. Everyone can write off all the mortgage interest from their taxes:  Most taxpayers can write off the interest they pay on their mortgage loan as a tax deduction, but the value of this write off may be less than expected.  It is based on combining this write off with other deductions, and if that total is less than the standard deduction given to everyone, then there is no additional benefit.  
7. You need a 20% down payment:  Although putting down 20% is ideal, you can put down a smaller down payment in exchange for paying PMI (private mortgage insurance) until you have enough equity in the home to have it removed, usually 20%.  FHA and VA programs require down payments as low as 3.5% and 0% if you and the property qualify.
8. All you need upfront is the down payment:  Along with the down payment, closing costs can be another 2-5% of your home's purchase price.  In addition, you should keep  enough emergency  cash reserves to cover at least  3-6months of necessary expenses and factor in things such as home repairs, improvements and furnishings for your new home.
9.  You need to save for your full down payment:  There are a number of government and some private programs that offer assistance, primarily for first-time home buyers with low to moderate income.  You may also look into taking a loan from your employer's retirement plan, withdrawing up to $10k from your IRA or taking a hardship withdrawal from your employer's retirement plan.  Just make sure to look into the rules, regulations and penalties for these options.
10. The only additional ongoing cost will be PITI (principal, interest, taxes and insurance):  Don't forget any applicable homeowner's association fees, utility expenses including electric, gas, water, sewer, trash, maintenance costs and optional costs such as internet and cable/satellite. 
    
    
    
    Family Realty always make sure our friends and family are completely informed! We can help you understand these home buying myths and can help make sure you're making the best decisions for you when it comes to home buying and selling.  Visit us at www.ViewLouisvilleHomes.com for more information.
    
    You can also find out more about these 10 common home buying myths by going to www.forbes.com.