Mortgage Myths Debunked: Buying a Home is Just Too Expensive

November 6, 2024

by Christian Phillips

There are many mortgage myths about down payment requirements, interest rates, credit score expectations, and more. We've previously addressed the myth that “Renting is Cheaper than Buying,” Especially in today’s economy, another common misconception remains prevalent: many first-time homebuyers often feel that purchasing a home is too expensive. We invite you to join our experts as we explore these down payment myths and highlight valuable resources designed to enhance your affordability. 

Understanding Down Payment Misconceptions:
When first-time homebuyers express concerns about a home being too costly, they frequently mention the daunting idea of a 20 percent down payment. While a healthy down payment is beneficial, most buyers don't need to meet this threshold. 

For example, Forbes Advisor offers insight into average down payments across various states:
State Median Down Payment Average Down Payment %
North Dakota $21,536 13.10%
Minnesota $37,685 15.50%
Wisconsin $28,846 14.60%
 
While down payments in our markets are around 14 percent, in some cases, first-time homebuyers are only required to provide at the minimum 3 percent down. Several factors influence these requirements, including:
  • The type of loan
  • Your credit score
  • Your debt-to-income ratio
What You Need to Know About Down Payments:
If you contribute less than 20 percent down, you are required to pay for private mortgage insurance (PMI). The cost of PMI is added to your monthly mortgage payment to cover the risk that the lender is taking by allowing you to borrow the money. 

Increasing Affordability:
First-time homebuyers have various resources available to help reduce some of the financial requirements that come with being a prospective homebuyer. 

Affordable Financing Options: Lower than Market Rates:
  • Accessible Homeownership Mortgage
  • Pathway2Home Program ITIN Loan
  • Mortgage Rate Relief
  • Government Funding Programs
Downpayment Assistance Programs:
  • Frandsen Downpayment Assistance
  • Home$tart
  • First Generation Homebuyer Loan Program
  • First Generation Homebuyers Community Downpayment Assistance Fund
  • Various county/neighborhood options – Check for fund availability
To learn more about these resources, visit Frandsenbank.com/ownyourhome/ 

Ready to Discover Your Options?
Taking the next step is simple: Consider getting pre-qualified to better understand your affordability. This informal, non-binding process involves chatting with a local Frandsen Bank & Trust mortgage lender who can provide insight into your financial possibilities. Just remember to share accurate information to ensure you get accurate affordability information. 

Next, we will debunk the myths of credit score requirements and walk you through the initial stages of the application process.
 

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The site you have selected is an external one located on another server. Frandsen Bank has no responsibility for any external website. It neither endorses the information, content, presentation, or accuracy, nor makes any warranties, express or implied, regarding the external site. Thank you for visiting Frandsen Bank.