It's easier to buy a home than many first-time homebuyers would believe

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Published Date 6/21/2023

There are a number of myths out there among potential homebuyers.

The first is the misconception that a 20% down payment is required for a home purchase. In reality, many other home loan options may exist. For instance, consumers can get into a home with as little as 3% down. "77% of non-cash, first-time homebuyers in 2018 purchased a property using a down payment of less than 20%," according to a study by the National Association of Realtors.

First time home buyers need to know how important it is to work closely with a mortgage professional because there are options out there for almost every type of homebuyer. It is, however, also incumbent on buyers to prepare and do their research. Homebuyers may be surprised how much money they can keep for emergency savings – instead of putting it toward their down payment – without significantly impacting their monthly mortgage payment.

Another misconception is that the price, closing time, and repairs are fixed. They're not. Nearly everything in a real estate transaction is up for negotiation. Rarely does everything line up perfectly in a listing. The price may be slightly out of reach, the home may be stunning except for the ancient carpet, or a buyer could need more time to wrap up their current living situation before they can move. That's where negotiation comes in, and it's one of the many benefits of working with an experienced real estate agent. An agent can help not only with the price, but also negotiate closing costs and any repairs or updates that need to be made to the property before the sale is final.

A less-than-20% down payment will require private mortgage insurance (PMI) to be added to the monthly payment, but it's important to note the this often can be removed once the debt to income ("DTI") ratio on the loan drops below 80% or as part of a refinance where the new DTI is less than 80%. The exception is with an FHA loan, where the only way to remove the PMI payment is by refinancing to a conventional loan.

Of course, every journey to homeownership is different. But experienced Realtors and mortgage consultants are available to help guide first-timers through the complex real estate process.

Source: TBWS

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