Buying a home can be scary. There are a lot of ideas out there floating around and every person you talk to will probably give you a different answer. There are a lot of myths and when it comes to buying a home, you want to make sure you have all your facts straight. On this episode of Ramona Revealed, we sit down with the Monopoly Man, Rodrigo with Cross Country Mortgage to answer the questions: myth or fact?
A question I get a lot from my buyers is, “do we have to put 20% down on a home?”, this is typically suggested so that you get more favorable loan terms. Another benefit of putting 20% down, if you can afford it, is that you won’t have mortgage insurance. The truth of the matter though, is that you don’t need to put down 20%. Surprisingly, many buyers, especially first time home buyers, put down as little as 5%. If you qualify, you can actually put zero money down when buying a home. This is based on factors such as your credit score and debt to income ratio, but it can allow you to pay less money or even zero money down. So, if you do not have the 20% to put down, no worries, there are a bunch of alternatives for all different kinds of buyers.
Normally, when you are buying a home, you would need to have 10-20% of your home costs saved up beforehand. This was typically meant to protect mortgage lenders. Like we mentioned earlier though, there are options. You can have a down payment of 20% or no money down. What you need to keep in mind is that usually 2.5% of the purchase price is going to be needed for the closing costs. If you are low on funds though, and you have an amazing agent (wink, wink), you can negotiate with the seller to pay for the closing costs.
Another common question is how important credit score is when it comes to buying a home and whether or not it is true that you need a 700 credit score in order to get approved for a home loan. This is a MYTH! You do not need a 700 or 800, some programs don’t even ask for your credit score! A good start for an entry loan would be around a 580 credit score. Typically with a government loan such as an FHA or VA, you need at least a 620 score. The factor of your spouse’s credit score can also be factored in and utilized in your favor for these types of loans. If you do have a 700 you do get rewarded with a lower interest rate, but there is always help and consultations available to discuss what is best for you.
I hope this helped you banish some myths and prepare you more for buying a home. If you’re looking for a real estate agent to help, I hope you keep me in mind. Catch some bloopers at the end of the video and be sure to subscribe to my video and blog to stay up to date on all things Ramona and real estate!