Common Home Buying Myths

Super low interest rates (among other things) make the thought of buying a Tulsa home very attractive, even in a seller’s market. But some home buyers may still hesitate to take that leap. What is holding them back? They probably believe some of these common home buying myths. Let me set the record straight.

Common Home Buying Myths

Must Put 20% Down

Many financial experts recommend that you put 20% of the purchase price down when buying a home. That helps you avoid paying PMI, which also lowers your monthly payment. But with the average Tulsa home valued at almost $140,000, that means coming up with just over $27,500 out of pocket before adding in closing costs (typically about 4% of the purchase price). That ends up being quite the chunk of change. If you do not happen to have that much lying around, don’t fret. Many lenders offer programs that require a downpayment of 3% to 3.5%. Former and current military members may qualify for zero down. The REI Down Payment Assistance Program may help you with your down payment as well. There are even programs to help you with your closing costs. Talk to your lender about all of your available options.

Absolutely No Debt

Another one of the common home buying myths floating around out there is that you must pay off all of your debt before you can qualify for a home loan. That is absolutely not true. In fact, carrying no debt at all may actually work against you in some cases. Lenders like to see how you manage your debt. To do so, you should carry at least some debt. However, too high of a debt load works against you, too. Lenders like to see a debt load below 36% of your monthly income.

Excellent Credit or No dice

Yet another one of the common home buying myths we hear about is that you need an excellent credit score to qualify for a home loan. Let’s blast that one right out of the water. Just over one percent of Americans can claim a perfect score of 850. Only 20% of Americans have excellent credit (800 or above). So, if only 20% of Americans bought homes, the real estate industry would be in a slump instead of the thriving market we see today.

In reality, people with scores as low as 620 qualify for home loans every day. Some programs even allow for a score as low as 580. Of course, the lower your score, the higher your interest rate. Therefore, it makes sense to whip your credit into its best shape ever before you apply for a loan. But even then, it does not have to be “excellent”.

Family First

Many buyers put off buying their first home until after they get married or start a family. That is not necessary. In fact, you might want to purchase one before you start either a marriage or family. Many Milliennials put off marriage and babies until their 30’s. Gen Z’ers appear to follow in their footsteps. Purchasing a home remains a solid financial investment. The earlier you start thinking about your financial future, the better off you tend to be.

Established Career First

Along with family, another common home buying myth we see is that you need to establish yourself in your forever career before you commit to a huge financial decision like buying a home. The truth is that lenders want to see you with stable employment (typically, two years at least). It does not have to be in an industry you aspire to work in eventually. Think of it this way; if you can afford your Tulsa home while working your way to the top, you should have no problem affording it once you get to the top. Plus, you will have built up equity in the process.

Primary Residence First

Finally, the last one of the common home buying myths we hear about is that the first home you buy must be your primary residence. An investment property might prove more advantageous to you living in it. Some people rent out a small place (preferably closer to work) but purchasing a property to use as a short or long-term rental (AirBnB anyone?). This does not work for everyone. But it could work for you. Talk to your lender about your best options before deciding which option to take.

Lori Cain, REALTOR®, Serving Midtown and the greater Tulsa, OK area. Call 918-852-5036.