As agents, our clients often disclose the fears they have when in regards to becoming a homeowner. And though valid, some fears delay the homeownership process unnecessarily. So we want to outline (and dispel) a few common fears and provide insight that helps our clients push through their hesitation and get to closing day!
Interest Rates
High interest rates can be scary because the higher the rate, the higher the mortgage payment but the advantage with interest rates is that they are not permanent. Also, lower rates bring more buyers into the market, making home buying more challenging because of bidding wars, so we recommend you take advantage of the leverage you have as a buyer (to negotiate the best deal for yourself) when interest rates aren’t as competitive. We like to say “date the rate and marry the home”. The price of the home is fixed but you can always refinance when rates drop to help lower your mortgage payment.
Credit Scores
This is a valid concern as most lenders will require you to have at least a 620 credit score to be approved for a loan. The sooner you can speak with a lender and agent the better. If you're further out from making the purchase that gives you plenty of lead time to do what is needed to increase your score which will also help you get the best financing terms.
Don’t have enough saved up to buy
Putting 20% down is not only rare but it actually isn’t necessary, between the both of us we can only remember one client that’s actually put down that much. With an FHA loan you can put down as little as 3.5% and as little as 3% for a conventional loan if you’re a first time homebuyer.
We also have resources that offer 100% financing with no PMI (Private Mortgage Insurance) or down payment assistance depending on each person's individual circumstances. We’ve had buyers pay as little as $2,000 out of pocket to get into their home, so there’s no reason to wait!
For those who want to start investing, there’s the Step Up Method. If you’re looking to purchase a 2nd home there’s a little trick we’ve both used. You can actually purchase the new home as your primary residence where you could not only get the best rate but also only have to put 5% down for a conventional loan, then rent out your previous home. This saves you from having to put down 20% and paying around 1% more in interest if you were to buy that 2nd home as an investment property. You can actually do this each year as a way to steadily build your real estate portfolio.
Home Repair Costs
Maintaining a home warranty on your home can give you more predictability with cost and peace of mind with your home. Generally your homeowners insurance will only cover catastrophic incidents but a home warranty has a broader coverage for many of the major systems in your home (i.e. plumbing, electrical, HVAC, appliances, etc). These policies typically charge a $100 deductible per incident and it’s as simple as picking up the phone and calling their number to get the repair process started. These warranties can range from around $500-750 depending on the plan tier and what items you want covered. Keep in mind if you hold off on renewal til close to the end of that year you could receive a coupon for savings off of that next year.
For any concern outside of warranty coverage we have an extensive list of contractors that we’ve worked with to help you get the best price and quality. We can help you coordinate this to make it a smooth transition into your new home.
So we’ve shared a few of the common fears our clients bring up, but now we want to hear from you! Do you have any of the same fears or is there something else you’re trying to work through? Either way, we want to connect with you and get the conversation started. Homeownership is a big decision but we believe it’s one of the best and most rewarding decisions you can make.