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Purchasing a home is one of the largest financial commitments most people will make, and the process often feels intimidating. We get it! Whether this is your first home or forever home, we’re addressing — and busting — 5 of the most common home-buying myths:

• Myth 1: You need to put 20% down
• Myth 2: You must be debt free
• Myth 3: You need amazing credit
• Myth 4: Prequalification and preapproval are the same
• Myth 5: You must pay all the closing costs

Know the truth about buying a home, and you can make an educated decision about one of the most rewarding purchases of your life.

Myth 1: You need to put 20% down

Busted! You have options.

Don’t let that 20% down figure discourage you from making an offer on a home. The truth is, there are home loans that allow you to put down as little as 3% — and in some cases even 0%! For example, zero-down loan programs are available for first-time homebuyers, veterans, or those who qualify for the USDA program.

A small down payment is not uncommon. Almost three-quarters of first-time homebuyers and half of all non-cash home purchases put less than 20% down for their payment, according to the REALTORS® Confidence Index Survey.

Numerica offers a number of home loans to help you get the house you want!

Myth 2: You must be debt free

Busted! Don’t let debt fool you.

According to research by the National Association of Realtors, nearly a quarter of all homebuyers have student loans. Other common debts include auto loans, credit cards, and health care costs. Rather than letting your debt negatively affect your home-buying decisions, know that accruing debt and showing the trustworthiness to pay it back is a crucial element of your credit score.

The bigger issue is making sure your debt-to-income ratio is not too high. What is debt-to-income ratio? Add up all your monthly debt payments. Divide that total by your gross monthly income. The ratio, shown as a percentage, is used by lenders to determine how well you manage monthly debts — and if you can afford to repay a loan.

Before assuming your debt will prohibit you from buying a house, meet with your lender or contact one of the Numerica home loan team members to review your options.

Once you determine you’re in a solid position to take on a home loan, consider this rule of thumb: Your house payment should represent one-third of your monthly income or less.

Myth 3: You need amazing credit

Busted! You are more than your credit score.

It’s true, your credit score factors into getting a better mortgage rate. However, even those with less-than-stellar credit might qualify for a home loan. Your credit score is part of your story, but it’s not all of you.

Typically, there are home loan options for people with credit scores 620 and above. Each lender has its own criteria for approval. Although interest rates are sometimes higher for people with lower credit scores, they may still be approved.

Talk with your lender and explore your loan options. Remember, Numerica looks at your entire financial picture when approving your home loan. We’re committed to serving people, not credit scores.

Myth 4: Prequalification and preapproval are the same

Busted! Prequalification does not mean, “I got the loan.”

While these two terms sound alike, they are actually different steps in the home-buying process. Prequalification is the beginning conversation to determine what kind of loans you might be eligible for as well as an estimate of your budget. This first step gives you understanding of how much money your loan could be approved for.

To prequalify, you provide your lender with income, debt, and asset information. Your lender uses these things to determine your possible loan amount. This is not an in-depth process, and it does not consider your credit score. After prequalification, you and your lender can look into the types of loans that will best suit your financial situation.

Preapproval requires a mortgage application and a thorough review of your credit history and financial life to date. Following this complete review, your lender can give you an idea of the amount of money and interest rate at which you could borrow.

Myth 5: You must pay all the closing costs

Busted! This may be negotiated.

Closing costs are fees in addition to the base price of your new home. These costs can include:

• Appraisal
• Title insurance
• Lender costs and fees
• Homeowner’s insurance
• Legal fees

In many situations, the homebuyer pays the closing costs and the seller pays a portion of the title insurance and escrow or closing fees. That said, there are times when the buyer pays both.

In most cases, closing costs can be negotiated. It depends on the loan type and market conditions, but closing costs should be factored into your negotiation process.

When considering the purchase of your new home, keep in mind closing costs can total between 2 to 5% of the purchase price. These costs are typically added to the down payment amount, and all funds are due at closing.

Myths busted

And there you have it, some of the more common home-buying myths — busted!

If these revelations have you feeling it’s time to consider buying a home of your own, you’re probably right! The Numerica team is ready to work with you to find out how much house you can afford and what loans might work best for your situation.

The keys to your future are in your hands. Let us help you open the door.

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