6 Down Payment Myths You Should Stop Believing Immediately
Purchasing a home should be a considered and well-planned decision of a buyer. With the team of experienced specialists, a person can make the right choice for his future home and investments. Nevertheless, today there is a huge flow of information about conditions of buying the house or apartments, and often it is very difficult to recognize facts and myths. That’s why in this article we will define the truth about the most popular misconceptions of purchasing the property.
Buying a home is an important decision in one’s life. Many potential buyers turn to real estate agencies, signing an agreement, according to which the company undertakes to find an object, provides related services and also accompanies the client until the moment of the transaction. Such management services are especially popular among foreign investors.
In particular, in Ukraine, the foreign buyer can fully rely on professional real estate companies that will handle all the issues related to the investor’s property. Ukrainian developers not only provide excellent assets for foreign investments but also have extensive experience in legal affairs and management services in the housing sector. If the foreign investor wants to receive the income through renting out his apartment, such Ukrainian real estate companies can also help to find tenants.
Turning to the professional real estate specialist is the best option when planning the purchase of a home. However, it is also necessary for the buyer to know the basic data related to the real estate market. Today there is a huge flow of information about the specifics of buying the apartment, and sometimes the investor faces the problem to recognize where a myth and the truth are. That is why we will look at the most popular misconceptions about the real estate and will define the truthful facts.
Myth number 1: 20% down payment.
The truth is for now a person can afford to purchase a house investing only 3-5% of the cost of the house for a down payment. Thanks to various programs, a buyer has an opportunity to make a lower down payment, and the lender with whom he works can advise the best option for the buyer’s particular conditions.
However, it should be noted since a customer invests less money, he becomes a more risky borrower for the lender than those buyers who make 20% for the down payment. Therefore, a buyer will most likely have mortgage insurance as part of the monthly payment.
Myth number 2: not to apply to a real estate agent until a buyer is ready to purchase a property.
The sooner a buyer calls an agent to help him with the purchase, the better conditions for the buyer are. Even if a client is in the initial stages of randomly browsing popular sites, a real estate expert can be of significant help and will save the buyer’s valuable time.
The real estate agent makes a search for a client in MLS, and consequently, a buyer will receive notifications about every home that matches his criteria as fast as it appears on the market. Compared to many well-known search sites, MLS reflects the actual status of properties on the market. As an option, the realtor can provide his client with its own website for search connected to MLS.
Knowing the situation in the real estate market and applying to an agent as soon as possible are beneficial steps of a buyer towards purchasing a home, as he eventually sets realistic expectations for when to begin the process of buying a home and what options he can afford. The real estate agent provides his assistance at all stages of the purchasing process, working on the behalf of his customer. Moreover, the agent’s remuneration is paid by the seller of the house which means turning to a real estate specialist is not only a useful step in the process of purchasing the property but also cost-effective.
Myth number 3: houses requiring reconstruction and thorough repairs are more budgetary.
There are numbers of shows on TV that encourage potential clients to search a house requiring thorough renovation, supposedly because such an option is more affordable and gives a buyer the opportunity to ultimately create a house according to his wishes. However, this is far from reality. Homes requiring reconstructions also demand much budget to invest in them. In the case when a buyer is interested only in purchasing an older house that requires a lot of transformation, then consulting with an experienced contractor and the lender is a must in order to find out the real cost of repairs and to double-check whether the expenses of the client will withstand his budget.
Myth number 4: client’s down payment is the only prepayment.
The initial down payment is a serious amount, but this is not all expenses that a buyer spends while purchasing a home. When closing purchase, a buyer makes an advance payment and also pays the cost of the closing itself which often ranges from 2% to 4% of the total cost of the house. This amount includes expenses of the homeowner and title defect insurances, as well as house valuation fees.
Myth number 5: the downtown should not be more than 20%
A buyer is not limited to the downtown of 20% and this is the truth. Supposing, a customer has more than 20% of down and would like to use it in purchasing the home. Such an option is not only possible but also has two major benefits for the buyer. First, a higher downtown is a sign to the lender that a client is a reliable borrower and consequently can get him a lower interest rate on the mortgage. Secondly, the more client pays in advance, the less he borrows, which again means lower mortgage payments.
Every case is individual, and before putting more 20% of downtown, a buyer needs to know the variety of his options before choosing the best for him. Probably, there is no sense in paying extra down and the best way will be keeping the money in investments that will work for the client.
Myth number 6: a client can take a loan for a down payment.
The truth is that a customer can get help with downtown but it must be a gift. To prove that the money is not the loan, a buyer needs to provide a letter from the gifter in which it is said that money is the present and won’t be asked to be back. Importantly, the buyer must not play with the system and lie to legal structures otherwise lying on a mortgage statement is a serious crime.