Millennials are forecasted to be a driving force in housing in 2015, with the majority of them being first-time homeowners.
“Roughly 42% of millennials say they want to buy a home in the next one to five years, compared to just 31% of Generation X, and by the end of 2015 millennials will become the largest home-buying age group,” said Stan Humphries, Zillow chief economist, in regard to Zillow’s 2015 forecast.
With this in mind, Joel Gurman, vice president of mortgage banking at Quicken Loans, compiled a list of seven myths that first-time homebuyers might believe.
Myth # 1: Lending requirements are tight.
“You should consider your financial situation, but realize that the requirements to buy a home may not be a tight as you think they are. Talking to a reputable lender and looking into low down payment plans are always options to consider for first-time home buyers,” Gurman said.
Myth # 2: You don't need to check your credit.
Homebuyers need to check up on their credit before they choose to begin the mortgage process. This includes knowing what is on the credit report as well as the credits core.
Myth # 3: “Preapproved” and “prequalified” are the same thing.
Prequalification refers to an estimate a mortgage banker provides based solely on a homebuyer's self-stated income to give an idea of how much home they can afford. Meanwhile, a pre-approval is a step up from a prequalification, where lenders pull credit to determine a more accurate picture of what the buyer can afford.
“The preapproved estimate is not set in stone, but it is much more accurate than a prequalification and can give buyers an advantage over others who have just been prequalified,” Gurman said.
Myth # 4: Talking to a lender comes after choosing a home.
Along with getting preapproved, all the details a home shopper has will not matter until the lender looks into the specific situation.
Myth # 5: You need to have a 20% down payment.
It is a myth that people must put down 20% in order to qualify for a home. In reality, there are many options out there for borrowers.
However, Gurman made sure to note that the lower the down payment, the higher the monthly payment.
Myth # 6: Buying a home only focuses on a shopper's wants.
“It’s important to look for specific things wanted in a home, but don’t let feelings overrule logic,” Gurman said. Shoppers need to balance how much they can afford and what they are looking for in a home.
Myth #7: Home inspections are not necessary.
Although all states don’t require a home inspection, it would be a smart choice to get the home looked at by a qualified home inspector before purchasing it. “If the homebuyer is planning on buying a fixer-upper, the home inspector can also help differentiate between things that need to be fixed for safety reasons and improvements for vanity’s sake,” Gurman said.