July 19, 2024
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Linking Northern and Central NJ, Bronx, Manhattan, Westchester and CT

Debunking the Myths about Homeownership

(StatePoint)—As a result of the recent housing crisis, many potential homebuyers, especial­ly first-timers, are hesitant to en­ter the market. But if you’re hold­ing back, evaluate why. Experts say your reasons may be based on myth.

“Buying a home is more af­fordable than ever for families with stable incomes and good credit,” says Christina Boyle, Vice President and Head of Single- Family Sourcing & Relationship Management, at Freddie Mac.

So before ruling out home­ownership, get the facts. Boyle is offering some tips to help you sort fact from fiction.

• Myth: I need to make a big downpay­ment, as much as 20%, to get a mortgage.

• Fact: A 20% downpayment is not the golden rule. Generally you should expect to put down about 5 or 10%. Note, howev­er, you may be required to pay mortgage insurance if you make a downpayment of less than 20%.

When deciding whether homeowner­ship is right for you, don’t forget to consid­er other expenses like closing costs, prop­erty taxes, and maintenance costs.

• Myth: I need perfect credit to buy a home and will never qualify for a loan.

• Fact: In response to the housing cri­sis, banks re-evaluated the criteria for lending money to help put buyers in a more financially comfortable position and ensure they can afford what they buy. So while it’s true that getting a mortgage today requires a stronger credit history than in past years, you don’t need perfect credit. Keep in mind though that the high­er your score, the more options you have when looking for a mortgage.

• Myth: I don’t make enough money to own a home, so I plan to rent for the long-term.

• Fact: In many areas of the country, it is more affordable to own a home than rent one, especially as rents are rising fast. With a 30-year fixed-rate mortgage, you’ll have the certainty of knowing what your mortgage payment will be for 30 years, whereas rents could continue to rise.

Despite these facts, note that home­ownership is not necessarily the right step for everyone. If you move frequently or don’t have time for home maintenance, renting might make more sense for your lifestyle.

• Myth: Mortgage rates are rising too fast and I’ve missed the window of oppor­tunity to buy.

• Fact: While mortgage rates have risen over the past year, they are still at near his­toric lows, with a 30-year fixed mortgage under 4.5% at the start of 2014. These rates make homeownership very affordable.

For comparative purposes, in 2000, rates averaged 8%; and in the ’80s, they spiked to 18.5%. To put that in perspective, a mortgage payment on a $150,000 loan at today’s 4.5% is $760 per month, whereas in 2000, it would have been $1,100 (not in­cluding taxes and insurance).

Free home buying resources, such as worksheets, mortgage calculators, and overviews of the mortgage process are available at www.FreddieMac.com.

Considering homeownership? Don’t assume it’s out of reach. Educate yourself on your local market and reach out to a housing professional to get started. PHOTOSOURCE:(c) StuartMiles- Fotolia.com

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