9 First-Time Seattle Homebuyer Myths

When you are first looking into becoming a homeowner, you might hear a lot of contradictory and confusing information. Homebuyer myths are usually just that – stories that spread but aren’t usually true. If you are purchasing a Seattle home for the first time, here’s a primer on what’s fact and what’s fiction during the process.

The following is a list of some of the most common myths around buying a home and obtaining a mortgage in Seattle.

#1: A 30-Year Loan Is Your Ideal Option

Myth: As you shop around, the most common mortgage plan you will see is the 30-year fixed plan. The main appeal of the 30-year loan plan is that it is the most potentially affordable option, since it offers the lowest monthly payments, while any short-term plan will increase the payments. Your home payments are at a fixed rate, so you essentially get a cheaper, consistent plan than most of the other options. Additionally, if you are considering keeping this home for a long time, the 30-year plan seems like the ideal choice, since you do not have to worry about making short-term decisions and can afford to spread your payments out over time.

Fact: While the 30-year mortgage plan is the most popular choice and seemingly the most convenient, it is not necessarily the best fit for every homebuyer. You might not feel comfortable with making such a long commitment and may want something closer to a 15 or 20-year loan plan instead.

A 30-year plan might have you pay more overall, since you are borrowing money for a longer time. A 15 or 20-year plan offers lower interest rates, which might be beneficial to you. If your budget allows you to pay higher monthly payments right away, then a shorter loan plan can help you clear off your payments faster. Another choice you have is taking a 30-year loan plan but paying off extra to your principal as much as you can. Ignore homebuyer myths and consult with an industry professional to run the numbers and choose the best plan for your situation.

#2: No Credit Means No Home

Myth: Many people erroneously believe that if you don’t have any credit history, it’s impossible to get a home loan. Some even believe that it’s worse than a bad credit history because there’s no proof of your payment history.

Fact: While lenders prefer you have some credit history before offering loan options, having a qualifying income, a substantial down payment, and possible co-signers can make up for a lack of credit history. Additionally, creating a positive payment history doesn’t take long; your lender can discuss ways for you to build credit without negatively affecting your debt-to-income ratio.

#3: You Should Not Pay Less Than a 20% down Payment

Myth: When you first buy a home, it is common to hear that you should make a down payment of at least 20%. Lenders encourage a high down payment, as they see that you are committed. They can protect themselves with a higher payment if you suddenly forfeit. Higher down payments also have their advantages, such as lower interest rates, a head start toward building home equity, avoiding private mortgage insurance (PMI), and more trust in general from lenders.

Fact: As we have discussed in the past, not all lending options require that put down a 20% down payment. Times are changing, and as the median down payment increases for a first-time buyer, income generally remains the same. People are no longer able to secure a reasonable down payment and pay it immediately. Besides, making a smaller down payment has its own advantages. For starters, while you may have to pay higher interest and bills, you also have some money left over you can invest, remodel, or use for emergencies. You can also perform home improvement projects with the extra money. These repairs and remodels will increase your home’s value, build up your equity, and even reduce PMI.

#4: Renting in Seattle Is Cheaper Than Buying

Myth: “Renting in Seattle is just cheap as buying” is a common myth. For the most part, the amount you will pay monthly might be lower, but the circumstances are usually less than ideal. When renting is cheaper, it often means too many roommates and not enough parking. In addition, most of the same challenges that come with buying a home come with a quality rental, such as making a down payment, strict credit and debt checks, and other requirements.

Fact: While buying a home might seem more expensive, it can save you money over the long run. For starters, rental costs fluctuate over time and usually rise, depending on multiple factors you don’t control. Meanwhile, if you purchase a home, your interest rate and overall mortgage payments will remain fixed, so you will enjoy some consistency. In addition, by being a homebuyer, you enjoy benefits such as home equity, which you can always use toward other financial needs. By using your funds on repairs and home improvements yourself, you can raise the value of your home and earn more equity, an opportunity you do not get in a rental.

#5: You Must Be Completely Debt-Free

Myth: This myth does make some sense at first. When you want to buy a Seattle home but have a high debt-to-income ratio, lenders may be hesitant to extend more loans. However, that simple formula doesn’t take into account the kinds of debt you may have – for instance, student debt (as long as you are repaying) is good debt because it means your salary will likely increase as a result of education. Credit card debt, on the other hand, doesn’t come with assets, so it’s negative debt. However, if you pay your credit cards on time and don’t over extend yourself, even those types of debts won’t stop you from getting a home.

Fact: The truth is, it is unrealistic to expect homebuyers, especially in today’s market, to be completely debt-free. When lenders investigate your records, they do not just look at your total debt, but also at other determining factors such as a strong credit record, how much you pay monthly, and whether your income is high enough to pay off your loan. Taking care of your loans is always a good financial strategy, but it should not deter lenders from offering you loan options. Consult your mortgage lender for advice in keeping up with your payments and how you should prioritize your income.

#6: You Must Have a Perfect Credit Record

Myth: This is also one of those homebuyer myths that seems deceptively reasonable at first. To a lender, a potential homebuyer with a strong credit history seems more appealing. A good credit record shows that you have purchasing power. It also shows that you have integrity, since you are capable of consistently paying all your debts and take any measure you can to repay everything. You could assume that any flaw or dent in your credit score makes you more of a risk that a lender would not want to spend time or resources on.

Fact: While a good credit history is a big boost when it comes to buying a home, it is unrealistic to demand perfection, and most lenders do not expect it. Lenders will usually research other factors to determine your mortgage approval, such as the amount you are offering as the down payment and your employment history. These elements alone do not determine approval, but combined, they provide a more balanced outlook at your eligibility. You can also raise your integrity by working with creditors to meet your responsibilities. There are plenty of mortgage firms and offers that can help you get a home with a lower credit score, but you should still aim to improve it.

#7: You Should Keep Looking for the Perfect Home

Myth: When thinking about getting your first house, you can get excited and start coming up with a list of some of the most desirable traits for your perfect home. After all, you are making a serious commitment at a great expense, so you should get everything you want. No matter what market you are in, it seems tempting to keep looking around and going through your options until you find a home that meets all the requirements in your wish list. If you are buying your first home, why should you settle for less?

Fact: Wanting to buy the perfect home that will fulfill all your needs and desires is understandable. However, it is also not realistic, especially in a competitive housing market. Waiting around for the right home might cost you plenty of opportunities for a more affordable home or improved rates. Having some deal breakers is not a bad idea. You should prioritize the four or five most important aspects of your homebuyer wish list. However, you may have to compromise on the other goals if you want to take advantage of a good deal. Try to find a home that is the closest to fulfilling your desires.

#8: Banks Don’t Want to Lend in the Current Market

Myth: The myth that banks are reluctant to lend money or offer loans because of an unstable market persists no matter how strong the economy is. The housing crisis of the 2000s help perpetuate this myth, even though the economy and housing market has been transformed since then. This is one of the most frustrating myths from a lender’s perspective because it couldn’t be further from the truth.

Fact: Lenders and mortgage brokers want to lend money and help people invest in homes. When you buy a home, you are buying a loan – and that loan is your lender’s profit. They want to get first time buyers in a home because it means a profit for them. Most lenders will work to get a home loan option regardless of their credit score or amount of down payment. If you are thinking of buying a home in the Seattle area are worried about how poor credit, lack of down payment, or not payment history will affect your chances, talk to a loan professional. They will work to find an option that suits your situation. If they can’t, then they can help you devise a plan to get you in a situation where home-ownership is a possibility. Don’t assume the answer is no before you talk with a pro.

#9: Buy as Much Home as You Can

Myth: If you qualify for a large loan, many people think the best option is to buy the biggest or most expensive house they can with it. The amount you qualify for depends on various factors like potential income, debt-to-income ratio, and credit history.

Fact: Even if you qualify for large loan, only you know your true budget. While it can be smart to buy the right house, buying more than you can afford is never smart. Though your loan amount offers some insight into how much you can afford, there are many factors that a bank won’t consider. For instance, do you or your partner have a job that might not be as stable as it first appears? Do you plan to have children or take care of elderly parents? Do you want to invest in other types of assets, like RVs, other cars, or boats? Being house-poor can be a tough option, so find the perfect house for you, but make sure it fits in a reasonable budget.

Get Real Answers from Mortgage Professionals

These are just some of the myths you might run into when you are first looking into buying a home. Remember that you will get lots of advice throughout the home buying process, some of it based on misconceptions, generalizations, or misunderstandings about the industry. The advice people give you may have been true for them or for the market they bought in, but home-buying options are constantly evolving. To avoid any issues, fact check the information yourself or speak to a mortgage professional.

To learn more facts and dispel more rumors about buying your first home, contact Sammamish Mortgage today and speak with one of our Seattle loan officers. The members of our team are knowledgeable, professional, and friendly. We will gladly answer any questions you may have and debunk more harmful homebuyer myths along the way.


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