Debunking the Myths of First Time Home Buying
We’ve all spent the last eight years watching people get burned on real estate, but home buying regulations have changed quite a bit since the foreclosure crisis. Now, we’re seeing people who bought their homes at the bottom three or four years ago making money.
Here’s some more good news: You haven’t missed the boat. There’s still plenty of time to make a healthy investment on a house.
It’s a buyer’s market again
Because the housing market was toxic for so long, we currently live in a buyer’s market that sees many houses go unsold for long periods of time. This leads to lower interest rates, which means the cost of a house over the lifetime of a mortgage is much lower. The result is that today’s consumers get more house for their money.
In addition, an FHA loan only requires 3.5 percent down, and it only takes a 580 credit score to qualify. This means it costs less than $9,000 to get a $250,000 mortgage and move into a new house — a pretty low price tag for a pretty big deal.
Millennials, in particular, have an aversion to home buying. Real estate and mortgages seem confusing, so they prefer to avoid the topic altogether. But buying a house shows you are committed to your surroundings and feel secure in your life — and it’s not nearly as hard as you might think.
Here are six home buying myths that could use a good debunking:
Shopping for a home is hard
As noted earlier, the financial requirements for buying a home today aren’t difficult to meet. And it doesn’t have to take six months to shop for and purchase a home. If you know what you want, a purchase can be completed in a matter of a month or two, especially with the help of tools that make real estate shopping easier.
Home buying requires perfect credit and a lot of cash
We explored how easy it is to qualify for an FHA loan. Heck, you don’t even have to come up with all the cash yourself. It’s perfectly acceptable for funds to be given by family or friends. Also, if you are or were in the military, VA loans require no money down.
There’s extra work involved
Customization is one of the best parts about owning a home. You can renovate it however and whenever you want without dealing with landlords. If you don’t like doing the work yourself, it’s easy to outsource by posting an ad on Craigslist or hiring the teenager down the street to mow your lawn.
You have to pay the asking price
The asking price isn’t necessarily a reflection of the home’s actual value. Like any major purchase, due diligence is necessary. There are plenty of cases where homes sell below (or above) their asking price; whether they are good deals depends more on inspection reports and the buyer’s research. Do your homework.
Brokering your own deal saves money
Buyers love cutting costs by trying to broker their own deals, but they don’t realize until it’s too late that the listing agent will end up getting double commission. Instead, find yourself a great agent who will get a fair price for your house — and split the commission with you.
Price is the only negotiable item
Just like at a car dealership, focusing solely on price is the quickest way to end up screwed in the long run. Mortgages are lengthy contracts. And though lenders use templates, it’s all negotiable before you sign on the dotted line. Pay attention to details like whether inspections are included, if there’s a mortgage contingency, or if liens exist on the property. Negotiate every detail, and be comfortable with the mortgage contract prior to signing the paperwork.
Buying a house isn’t that scary — unless, of course, you’re the one who bought the murder house on Elm Street.
An entrepreneur at heart, CEO Mike Kalis leads the team at Marketplace Homes, a Detroit-based brokerage that specializes in new construction sales and property management. In addition to his managing partner role at Marketplace, Mike is a venture capitalist and an investor in ZipTours- a startup that helps homebuyers and renters see a home with an agent streaming live to their smartphone. When he’s not busy creating new real estate solutions, Mike loves wakeboarding, playing guitar, and spending time with his family.