6 Myths About Buying a House, Debunked

 There are plenty of misconceptions about buying a home that many newbie buyers may innocently believe. We've listed a few of the more common ones, and the truths behind them.

Myth #1: You Need a 20% Down Payment

A down payment is part and parcel of getting a mortgage to buy a home. While the lender may be fronting the majority of the purchase price of the home you're buying, you'll still need to come up with a small amount upfront yourself.

That said, you don't necessarily need 20% as a down payment. The more money you put down, the less you have to borrow, but you don't need upwards of 20% or more to get approved for a home loan.

These days, you can get approved for a mortgage with as little as 5% down, as long as your credit score and financial health are strong enough to support this smaller down payment.

While a smaller down payment may be riskier for the lender and may come with a slightly higher interest rate as a result, you don't have to spend years saving up for a down payment that's bigger than it needs to be. If you find a home you love today and have enough to put down at least 5%, speak with a mortgage specialist to find out if you can get a mortgage without waiting.

Myth #2: You Should Apply For a Mortgage After Finding a Home

It might make sense to find a home first and then apply for a mortgage, but you may want to do the opposite. At the very least, you should speak with a mortgage specialist and get pre-approved for a mortgage before you start house hunting. A mortgage pre-approval will give you a leg up when it comes to buying a home.

For starters, you'll have a clear idea of what you can afford in a home. Your lender will provide you with an upper limit on the loan you can qualify for. Using this information, you can focus only on properties that fall within your price range.

Getting pre-approved first will also show the seller that you're a serious and qualified buyer. This can go a long way when you're competing with other buyers. Plus, being pre-approved will get the final mortgage approval process moving quicker when you do put in an offer on a home.

Myth #3: You Should Spend Up To What Your Lender Approves You For

When you get pre-approved for a mortgage, your lender will give you an upper limit of how much you can qualify to borrow, as mentioned. They arrive at this figure by looking at your income, employment, assets, debts, and credit score.

But just because your lender says you're eligible for a certain amount doesn't necessarily mean you should borrow right up to the limit. While you may be able to cover the mortgage payments for a larger loan, you'll be leaving very little money left over to cover all of life's other expenses.

Instead of winding up "house poor," consider buying a home for a little less to leave more wiggle room at the end of the month. That way you're not so strapped for cash.

Myth #4: Real Estate Agents Will Make Homebuying Much More Expensive

Real estate agents get paid for the services they provide, but it's not usually the buyer who pays: it's the seller. If you're buying a home, there's no reason to skip hiring a buyer agent to help, since you won't be the one flipping the bill for these services.

 You'd be doing yourself a major disservice by foregoing the help of a buyer agent in an effort to save money. Instead, an agent will help save you money by negotiating a lower price on the home.

Plus, they'll ensure that all parts of the transaction are covered so you end up with a sound deal, all without having to pay for the agent's services yourself. Let the seller take care of that.

Myth #5: Don't Worry About School Quality if You Don't Have Kids

If you have children or are planning to have kids in the near future, the types of schools nearby the home you're buying will certainly matter. But even if you don't have kids, you should still pay attention to the caliber of schools in the area.

That's because you should always have resale in mind when you buy. While you may not have any intentions of moving in the future, you never know what will happen. Never say never. And if you do plan to sell at some point, knowing that there are good schools in the neighbourhood will just add more value to your home and make it an easier sell.

Myth #6: You Can Always Back Out of the Deal

There are times when you can back out of a real estate transaction as a buyer, but only if certain precautions are taken. If you don't take these safeguards, you'll be stuck with the deal. And if you try to back out, you could be met with some consequences.

To give you an "out" just in case, make sure to include certain conditions in the offer. That way, if these conditions aren't met, you can back out of the deal and get your deposit money back. Conditions that you may want to consider include a home inspection, financing, or Status Certificate condition.

If you don't include these conditions or have already waived them – making the offer "firm" – you're legally bound to the contract. If your circumstances have changed before the deal closes, speak with a real estate lawyer and your agent right away to find out what recourse you may have.