As a first-time homebuyer, it can feel like there’s endless information about how to buy a home. You’ve probably heard advice about how much you need for a down payment, what credit score qualifies you for a mortgage, or whether it’s better to keep renting instead. It’s possible these home buying myths may be holding you back from becoming a homeowner.
In this Redfin article, we’ll debunk 11 common first-time homebuying myths so you can see what’s really standing between you and homeownership. Whether you’re looking at homes in Nashville, TN, or a condo in Chicago, IL, here’s the truth about buying your first home.
Myth #1: You need a 20% down payment
You don’t need a 20% down payment to buy a home. It’s a common myth that might be preventing you from becoming a homeowner. Many loan programs allow you to buy with little or no money down.
- FHA loans: As low as 3.5% down
- VA loans: 0% down
- USDA loans: 0% down
- Conventional loans: 3 – 5% down, depending on the lender
For conventional loans, keep in mind you’ll need to factor private mortgage insurance (PMI) into your budget. PMI is an additional cost your mortgage lender may require if your down payment is below 20% and the cost is factored into your monthly mortgage payment.
There are also down payment assistance programs that offer loans or grants that can reduce your down payment amount or closing costs. Down payment assistance programs are offered at local, state, and federal levels, so there are plenty of programs available.
Myth #2: Renting is cheaper than buying a home
Renting isn’t always cheaper than buying a home; however, it depends on several factors. In some cities, the average rent may be equal to or more than a mortgage payment. Mortgage payments are stable over time, whereas your rent may increase each year.
Additionally, if you plan to stay in a city for more than 5 years, buying a home can provide more stability and generate more equity in the long run….