Myths About Transitioning From Renter to Homeowner
Making the leap from being a renter to becoming a homeowner is a process that includes taking stock of your financial situation and determining whether you're ready for such a massive responsibility. For most people, the primary question is affordability. Do you have enough cash in the bank to fund a down payment, or do you have a credit score high enough to qualify you for a home loan? But there are other considerations, too—and plenty of misconceptions and myths that could keep you from making that first step.
Below, our experts weigh in on why some situations that may seem like roadblocks are actually not as daunting as they appear.
1. Buying a home means heavy debt
Some may argue that continuing to rent can spare you from taking on heavy debt. But owning a house offers advantages. As you pay your mortgage, you gain equity in the home and create an asset that can be used when needed, such as paying off debt or even buying a second home.
2. At least a 20% down payment is needed to buy a home
One of the main reasons buyers assume they must put down 20% is that without a 20% down payment, buyers typically face private mortgage insurance payments that add to the monthly loan payment. Once 20% equity is reached in a home, the buyer can eliminate PMI. This is usually accomplished by refinancing their loan, ultimately lowering their original payment that included PMI.
3. Your credit score needs to be perfect
Having a credit score at or above 660 looks great to mortgage lenders, but if yours is lagging, there’s still hope. Government-backed loans insured by the Federal Housing Administration have lower credit and income requirements than most conventional loans. A lower down payment is also a benefit of FHA loans. Lenders often work with home buyers upfront to discuss how to improve their credit to obtain a loan most suitable for them.
4. Now is a bad time to buy
Buying a home at the right time—during a buyer's market or when interest rates are low—is considered a smart money move. But don't let the fear of buying at the "wrong time" stop you from moving forward. If you feel like you've found a good deal, experts say there is truly no bad time to buy a home.
5. You’ll be stuck and can’t relocate
Some people may be hesitant to buy because it means staying put in the same location. Ideally, you should plan to stay in a newly purchased home for a minimum of three years, but in markets like ours, you will rarely lose money on real estate if you are forced to sell; you may also consider renting out the property.