With the number of homes on the market increasing, and the summer sales season coming to a close in a few weeks, first-time buyers have a rare opportunity.
There’s more choice than there has been for nearly six years, and research suggests a quarter of all sales are only finalized after the seller has given their buyer a discount.
When you combine these factors with the increasing pressure on the Federal Reserve to reduce interest rates, first-time buyers should feel optimistic that momentum is finally shifting a little in their favor.
Many financial experts anticipate a reduction in mortgage costs before the end of the year, which would reduce the current mortgage rate from its average 6.75%.
This means that either your home will be more affordable, or you should be able to borrow more from your lender.
As you size up your opportunity, here are eight myths about the market that first-time buyers tend to believe:
20% down payment – Some loans can be secured with as little as a 3% down payment. According to a recent survey, 71% of loan officers found the 20% hurdle to be the biggest myth among first-home buyers.
Pre-approval is a guarantee – No, it’s not. It’s your lender’s preliminary position of what it might lend you. It’s grounded in data, but it’s not a promise. Your loan application will be assessed based on the prevailing interest rate when you settle, and also the lender’s assessment of the property you wish to purchase. You can lock-in a rate when getting pre-approved, but usually it lasts only 12 weeks.
Prices will get lower – Property values fluctuate, but waiting for the so-called bottom of the market is a flawed strategy. In the past five years, the average price of an existing home has risen $141,000. So, please, don’t wait for lower prices.
Home, then loan – Get your pre-approval first because that will give you a budget. It will also ensure you can move quickly if you find your dream property. Sellers don’t tend to take buyers seriously if they haven’t got the cash lined up.
Lender loyalty – The idea you must take a loan from the company that gave a pre-approval is misplaced. You can shop around for the best deal even when you have that pre-approval in your pocket. However, don’t switch lenders once you’ve made an offer and you’re under contract. If that delays the process, the seller may look elsewhere for a buyer.
Fixer-uppers are bargains – Definitely not true. Many people overpay for this so-called opportunity and then face unknown remodeling costs. Unless you’re a builder, or you partner up with one, you are venturing into the unknown. And it could prove expensive.
Student loans – The myth suggests lenders will not consider people with student loans. In fact, if you’re paying that loan back promptly, it will give your credit score a nice boost. However, any outgoings will affect the ultimate calculation that determines the size of your loan.
It’s a bad time – Don’t listen to anyone who says that fall and winter are bad times to buy. There’s never a bad time on the calendar to buy.