Buying a home isn’t the right choice for everyone, but many renters self-exclude themselves from homeownership based on misconceptions they have about the home financing and homebuying process. If owning a home is a priority for you, don’t let these mortgage and homeownership myths discourage you from making it a reality.
Reason #1: I don’t have enough saved for a down payment.
A 2015 Wells Fargo survey found that a whopping 36 percent of respondents still believe that a 20% down payment is required to purchase a home. While a 20% down payment used to be the status quo, there are numerous options for homebuyers to put down little to no money on their home purchase.
Reason #2: My rent is cheaper.
Even if you do find a rental that is cheaper dollar-wise in comparison to a similar sized home’s mortgage payment, you have to factor in the tax and equity benefits of homeownership. A $1,000 rent payment is equal to a $1,300 mortgage payment when you factor in tax benefits like deducting mortgage interest and property taxes.
Reasons #3: I don’t have much credit.
No credit is not good credit, but if your credit history is limited, you still have mortgage options going forward. Certain loan types allow your lender to build a credit history with something called non-traditional credit. This means your lender takes payment history from alternative tradelines like your utility, cell phone, and rent to represent your creditworthiness.
Reason #4: My credit score isn’t perfect.
Whether you missed a credit card payment or you let a medical bill go to collections, in the realm of credit scores, it’s hard to be perfect. But that doesn’t mean a mortgage is out of reach.
While many renters are under the incorrect assumption that you need a high credit score to get a mortgage, Compass Mortgage has the ability to finance credit scores as low as 560 with FHA financing. See some other low credit score options here.
Reason #5: I don’t have time to keep up with maintenance.
Homeownership comes in lots of different shapes, sizes and maintenance levels. Purchasing a home doesn’t mean you have to buy into a 4 bed, 3 bath single-family home with a huge yard and immaculate landscaping. Many first-time homebuyers are opting in to townhomes or condos that give them the personalization, investment and tax benefits of homeownership while keeping their exterior home maintenance to a minimum.
Of course every potential homebuyer’s financial situation varies, which is why meeting with a mortgage banker should be your first step if purchasing a home is the route you want to pursue. To learn more about the homebuying and financing process, download our free Mortgage 101 Handbook, a great resource for first-time homebuyers.