7 Myths About Buying a Home Right Now
Forget what you think you know about home buying. Despite an initially slow recovery from an economic climate that made many homeowners cling to their houses fearfully – and made many renters decide continuing to rent felt like a safer strategy than purchasing – the market is healthier than it's been in a long time. Start making your wish list, and get ready to begin house hunting.
Myth 1: I can't afford the monthly payments.
While it's true that a house is typically the most expensive purchase people will make, it's likely more attainable than those who are dreamily perusing real estate websites perceive. First-time prospective home buyers, in particular, often worry monthly payments will be too significant to take on.
John Horton, Vice President and Senior Residential Lending Manager for Associated Bank in Chicago, asserts that buying a home is attainable for many who find themselves dreaming but doubting. "Pick up your phone and call us," Horton said. A one-on-one consultation with a lender could be just the ticket for revealing you're in a better position than you thought. "You'll be surprised what you can afford," Horton said.
- Use our handy calculator to help you figure out just how much home you can afford.
Myth 2: I don't have good credit or enough credit, and it's going to take a long time to repair.
Yes, you have to have credit to purchase a home. Yes, that credit has to be in good shape. However, if your credit isn't so great – or non-existent – never fear. It's possible for virtually anyone to improve their credit, given a little bit of time.
Did you know that everyone is entitled to one free credit check a year? Take advantage of that, Horton recommends, and check your credit score. Banks use reports from three sources – TransUnion, Equifax and Experian – to determine your overall score. "We take all three scores, we toss out the top and the bottom, (and) we keep the middle," Horton said of Associated Bank's assessment of credit.
See where you stand, and determine if there's work to be done. If there is, start opening tradelines that will amplify your credit score. "You need four tradelines in order to qualify for a mortgage, or at least get a credit score," Horton said. Tradelines are lines of credit like credit cards, car payments, a current mortgage or home equity.
Myth 3: I cannot afford to make the down payment.
"One of the big misconceptions that people – to this day still think is true – is you need (a large down payment) ," Horton said. That take on the housing market? "Absolutely not true."
Horton notes that VA loans offer financing, and low down payments are accepted for Federal Housing Administration loans and even conventional loans. Fear not – you're likely a lot closer to having the necessary down payment than you think!
Myth 4: I can start the process when everyone does, after Super Bowl weekend.
Real estate agents often circle Super Bowl Sunday on their calendars, because it's after that weekend the general public collectively decides to hit the house market with the force of a Hail Mary headed straight to the end zone. But if you're starting then, you could be starting too late. Horton warns against waiting until everyone else dives into the market.
Find out your credit score early – before you're ready to make the big move into your new dream home. Begin a dialogue with Associated Bank about becoming your lender. Apply for a prequalification* which is valid for 120 days. If you find you need to work on improving your credit, you might need six months to a year or two. "That's why you don't want to be in a rush, that's why it's never too early," Horton said.
One of the best parts of working in residential lending, Horton notes, is seeing prospective home owners become actual home owners. "A year later you're at a closing table with them, and they've bought their first house."
Myth 5: My lender won't be communicative.
Associated Bank lenders pride themselves on creating and sustaining an ongoing dialogue with customers. Once upon a time, the lending process might have taken place with a couple of face-to-face meetings in quick succession. Now, many of those who are buying want to establish a relationship and do their due diligence in terms of research, and the process of communication is quicker paced – often with lots of phone calls and emails – but over a longer span of time.
"There's lots more back-and-forth communication now, over the span of a couple of months, instead of a couple of days," Horton said.
The up side is both parties truly get to know one another. "When it's done over the course of 30, 45 or 60 days, the relationship you build … I would've never imagined, they're like your best friends."
Myth 6: Now isn't a good time.
According to many sources, interest rates, which have been at an all-time low for several years, are likely going be creeping up a bit. And even as interest rates tick up somewhat, Horton notes they will likely continue to be within reason for most homebuyers.
It's true the housing market recovered a bit more slowly in certain areas, but the tide has definitely shifted. And people are buying homes with a fervor in the Midwest.
"Our business at Associated Bank on the first mortgage side – which encompasses refinances, construction loans and purchases – it's been extremely solid all year," Horton said.
Myth 7: Millennials Aren't Buying.
According to recent reports, nearly 3 million first-time home buyers are expected to enter the housing market in 2017. There were 6.2 million new mortgages nationwide in 2015 – 50% were first-time homebuyers between the ages of 20 and 29.
*Pre-qualification is not a guarantee of approval and is based on the verbal information provided at the time of the request and is contingent upon, but not limited to, a full underwriting review. Pre-qualification is valid for 120 days from date of issuance and is not transferable. Employment and credit history must remain the same during the pre-qualification period. Purchased property must meet underwriting requirements and may require private mortgage insurance.
Loan products are offered by Associated Bank, N.A. Loan products are subject to credit approval and involve interest and other costs. Please ask about details on fees and terms and conditions of these products. Property insurance and flood insurance, if applicable, will be required on collateral. Member FDIC. Equal Housing Lender.