The 2024 housing market is likely to be fast-paced and competitive like the past few years, but homebuyers shouldn’t let these common home-buying myths scare them away. We are here to clear up the misconceptions about purchasing a house in today’s market, starting with these top 5 myths.
Myth #1: The only way to win a home in a hot market is by waiving the home inspection.
In a busy real estate market like we've been experiencing, people are getting creative with their home offers to score their dream properties. One question we’ve been hearing more often has been, “Should I decline a home inspection and just purchase as-is?”
The idea that you should forgo a home inspection is a big - and risky - myth. Foregoing a home inspection might win you the house, but it also could bankrupt you! Completing a home inspection - even if for “informational purposes” only - will always be a wise decision that can save you money and endless headaches. Waiving a home inspection should be a last resort for most buyers.
One approach to home inspections that can still boost your rapport is to assure the seller that you won’t ask for repairs. Your offer is still contingent on the inspection - and if anything extreme like a bad foundation or a major plumbing issue shows up you still have a way out of the contract - but the person selling the property has the reassurance that he won’t be stuck with the time and expense of negotiating repairs if he accepts your offer.
Fact: There are more effective ways to craft a winning bid than sacrificing your inspection.
There are plenty of other, safer ways to boost your offer in the eyes of a seller that don’t carry the risks of a waived inspection. Work with an experienced real estate professional who knows how to craft a competitive offer to bid wisely!
Myth #2: Wait to get pre-approved for a mortgage until after you find the perfect house.
For first-time homebuyers especially, there’s a stigma that often has people waiting to seek approval for loans until they have found the house they want. This misconception is rooted in the idea that you should know exactly what you’ll be paying before you ask for money.
In reality, getting pre-approved ahead of time is a great benefit to your search! In today’s competitive market, you need to be prepared to act on a listing as soon as you see one that ticks the boxes (whether they are that perfect chef's kitchen or the school district you want your kids in). This includes having your financing in order when you make your offer.
Fact: There is a lot of wisdom and no harm in getting pre-approved for a mortgage before you’ve found your home.
Getting pre-approved for a loan typically involves a short online application and copies of your most recent tax return, bank statements, and a pay stub. Most lenders do not run a hard credit check during the pre-approval process (that comes after you find the perfect house) - so there truly is no harm in getting yourself pre-approved!
P.S. Don’t forget to consider all the costs of owning a home when creating your home-buying budget!
Myth #3: Always start with an offer lower than the asking price.
Sure, this is a common and effective strategy in a down-market environment. However, when it’s a strong seller’s market, you typically have just one chance to get the seller’s attention and compete with other offers that are coming in fast.
That doesn’t mean you have to make an offer over full price. Learn about home sale contingencies and explore other ways to make your offer competitive besides paying more than asking price.
Fact: In the 2024 market, first impressions will matter on all home offers.
Every property and listing is different, so there are still instances when you might find yourself bidding below the listed price in today’s market. However, these moments are rare right now across the country.
Myth #4: You must have a 20% down payment to buy a home.
Buyers often wait to purchase a home because they do not have 20% of the selling price to use as a down payment, but many don’t realize they can still buy a home and secure a reasonable monthly mortgage with a smaller percentage set aside. If buying now makes more sense for you than renting, keep reading!
There are many ways to secure down payment assistance, and your down payment price is just one of many factors (including credit score, debt-to-income ratio, and work history) that lenders take into account.
Fact: The average U.S. down payment is only 6% of the selling price.
In fact, the average American puts down 6% on a house, and some loan types and programs can make that even less. (If you’re in the military or a veteran like many Hampton Roads residents, the VA loan program has a minimum down payment of 0% and doesn’t require PMI.)
There are some perks of putting at least 20% down, however, that bolster this myth. Most people who put less than 20% down must pay private mortgage insurance (PMI) and will have a higher monthly payment. A larger down payment also shows a stronger financial position, making your offer more appealing to a seller.
Curious to know if you qualify for a mortgage even without a 20% down payment? Talking with a local lender and getting pre-approved will help you get a better understanding of what you can buy and how much cash you will need to put down.
Myth #5: You need to be debt-free with perfect credit to buy a home.
If your current debt or credit score is the reason you haven’t talked to a mortgage lender yet, stop letting that hold you back!
Yes, debt is a factor in the loan eligibility equation, but the lender is actually looking at a combination of factors. First, your mortgage lender will take a look at your debt-to-income ratio. This is the formula that will determine your spending power, or “how much house” you can afford.
After that, your lender will discuss with you your FICO credit score and what it needs to be to secure a higher-priced home. Depending on the type of loan, the requirements for your FICO credit score may vary. For example, first-time home loans (also known as FHA loans) require a minimum score of 580 for the buyer to be eligible for a smaller down payment (usually 3.5%).
Fact: Debt is not a deal breaker in securing a home loan.
Living debt-free is a noble effort for some individuals and families, but it’s not always realistic. Every homebuyer’s financial journey is different, varying by stage of life, marital or family status, student loan debt, and more. Talking to your mortgage lender will bring clarity to the steps you need to take to become eligible for a loan - if any!
The Bottom Line
Misconceptions about the home-buying process can add unnecessary complications or hesitancy to get it started. Don’t let these myths about buying a home hold you back! It’s important to work with a top real estate professional to make sure you have the clarity and confidence you need to make the perfect house purchase for you.