10 Real Estate Myths Debunked

myth #1: you need cash for a 20% down payment.

The amount required for a down payment varies by the type of loan. Conventional loan down payments range from 3%-20%, whereas FHA loans may only require 3.5-5% down payment. It’s important to discuss these options with your lender when selecting the right loan package. We also recommend shopping the market when it comes to lenders (just as you’d shop for a home).

myth #2: you can’t purchase a home without pristine credit.

Sounds harsh, doesn’t it? While a higher credit score generally allows for a more favorable interest rate, it doesn’t mean that poor credit is an insurmountable hurdle. There are many options available for buyers of all incomes and credit tiers. Talk to your lender - in this case, knowledge really is key. It may take some research and time to build up the credit or cash reserves needed, but you’ll find the perfect match for your situation.

myth #3: you have to pay off all debts before purchasing a home.

We’ve said it before and we’ll say it again - Not all debt is bad. Having a historical record of regular, timely payments for debts looks favorable to most lenders. Paying off a debt right before the purchase of a home could deplete your cash reserves, thus rendering your ability to pay the down payment or closing costs burdensome. It’s a safe practice to discuss all debts and your intentions with your lender.

myth #4: spring is the best time to buy a home.

In Texas it’s often late spring into fall that sees the most real estate traffic. This is frequently driven by families eager to purchase a home in time to have children enrolled in a particular school. Late fall and winter see the fewest buyers looking at homes. That may be attributed to weather and/or holidays. With that being said, every situation is different, as are buyers intentions.

myth #5: a cash offer trumps all.

There’s an assumption that a Seller, when deciding between two or multiple offers, will always go with the cash offer. It’s important to remember contracts have many variables, including the manner of payment. Take an inspection for example. Should a financed offer (one requiring a loan) decide to forgo an inspection, then perhaps their offer would be more appealing. Or perhaps the all-cash offer asked for a 90-day close, whereas the financed offer was willing to close in 30 days. Should the Seller want to move quickly, the financed option would meet their needs. Now if the terms of both offers are the same, with the only difference being cash versus financed, then sure, the cash is much more appetizing.

myth #6: a homeowners association aren’t a big deal.

The truth is that associations have a great deal of control over what you can do, even in your home. Did you know they can dictate where your trash cans are placed, if you can install exterior lighting, or where your friends should park when visiting? At the same time, they make sure roads are in good condition, your neighbors are taking care of their yards, and promote community connectivity with neighborhood events. If you’re looking at a home located in an area with an HOA, you owe it to yourself to do your due diligence before signing that contract. Keep in mind HOA’s have regular fees and this will play into your monthly costs.

myth #7: the money put into a home translates dollar-for-dollar into a higher appraisal and purchase/selling price.

Few items will bring 100% return on your investment. The cost put into a home may add value, but the value of those improvements is based on what the market is willing to pay for them. Yep, it’s not about you and your impeccable taste, but more so the buyer and their exquisite taste. In fact, most home renovations will only yield a 50%-66% return on investment. When doing such projects we recommend either keeping it simple (like painting) or doing them for your own enjoyment.

myth #8: the contract price is the final sales price.

Ah, we wish it were that simple. Once under contract there are factors that can result in the modification of the sales price. Some of those include - inspection issues and buyers asking for a price reduction, as well as a home not appraising at contract value. Either option may result in a contract amendment.

myth #9: a home inspection either passes or fails.

The purpose of an inspection is to determine the condition of a home. An inspector doesn’t simply “pass” or “fail” a home. There are no letter grades or numerical values. The inspector will provide a report explaining all issues, along with a summary of key systems such as plumbing, electric, HVAC and the roof. This summary goes into details as to their age, economic life, functioning status and so on. Upon receiving the report, it is up to the Buyer and their Realtor to negotiate repairs/adjustments to the contract.

myth #10: the lowest interest rate is the best loan package.

A low interest rate is of great importance, yes. But what many Buyers fail to discern are the additional fees lenders place on loan packages. Should those fees be high, it can effectively eradicate the excellent interest rate you’ve just been offered. It’s vital to evaluate the loan package as a whole - life of the loan, interest rate of the loan, type of loan (whether the rate can be adjusted or is fixed), as well as additional fees that may be tacked on (origination points, processing, underwriting, etc.). If you don’t understand the loan estimate you’ve been presented consult with your Realtor, an Attorney or someone you trust who is knowledgeable.

All opinions are my own.