Debunked: 3 Comon Homebuying Misconceptions

Purchasing a home is often the most significant investment for many customers. Our mortgage lenders recognize and address common misconceptions about the homebuying process every day. Here's the truth about homeownership.

You Do Not Need 20 Percent Down

In reality, you can buy a home with as little as zero percent down, depending on your loan type.

This is a common belief because homebuyers who save 20 percent of their home's purchase price as a downpayment do not have to pay mortgage insurance. This could also help lower your monthly payments. Mortgage insurance protects the lender against a loss if you do not pay your mortgage. The advantage of mortgage insurance for a homebuyer is that you can buy a home with less than 20 percent down.

Your Downpayment Is Your Only Cost

There are many additioanl expenses that are part of the homebuying process, including inspections, closing costs, and more. Your lender will likely help you set up an escrow account to pay your upcoming real estate taxes and homeowners' insurance. This means you may need funds for your down payment, closing costs, and cash reserves. Sometimes, you can negotiate to have the seller pay most or all your closing costs. Their contribution will depend on your down payment amount—typically 3 to 6 percent of the purchase price.

Your Can Only Use Your Savings

In many cases, you may use your checking/savings accounts, investment accounts (stocks & bonds), certificate of deposit (CD), monetary gifts from a family member, and down payment assistance programs. Each mortgage program has requirements for acceptable funding sources. If you are considering buying your first home, we recommend consulting with one of our experienced mortgage loan officers.