May 24, 2019
Everyone has a crazy story about their first time buying a home, but some of those stories are riddled with common real estate myths. With so much information to sift through during the process, it can be hard to distinguish fact from fiction. Here are the most common home buyer myths I hear:
Sure, a 20% down payment is great, but that doesn’t work for everyone. You can buy a home today with 3-5% down. A good lender can walk you through the options to have a lower down payment. With less money down, you’re a higher risk to a lender, so you may need to buy mortgage insurance as part of your monthly payment.
Note that some properties in Mammoth Lakes have very specific lending requirements. Some condo complexes will require 20-30% down, so be sure to discuss your down payment plans with your real estate agent early on and most importantly, get pre-approved for a mortgage so you are ready to make an offer when you find the perfect place.
It must be expensive for your real estate agent to be there for you and help you every step of the way, right? They spend countless hours working on your behalf. Luckily it’s not — for you, that is. Buyers typically don’t pay a real estate agent’s commission. Your agent’s fee will likely be paid at closing by the seller of the home you’re buying. The seller knows to factor this cost into the property’s total purchase price.
While you don’t want to waste anyone’s time, it’s smart to call in a real estate agent as soon as you start considering buying. Even if you’re just browsing the internet, a real estate agent can be a huge help. In Mammoth Lakes, having someone who knows the intricacies of the neighborhoods, different condo complexes, etc. can save you a lot of trouble.
A real estate agent can also set up a search for you in the Multiple Listing Service (MLS) so you get notified whenever something hits the market that meets your criteria. The MLS is usually more up-to-date than Zillow and Trulia. Setting up a search early on will help you get an idea of what’s available and what’s in your budget and save you time since you won’t need to scour the internet.
You’ve probably watched shows on HGTV that make fixer-uppers look dreamy. But beware: homes that need a lot of work also require a lot of money. Even big renovations (like a kitchen remodel) take a lot longer and often cost more than it seems on TV.
In Mammoth Lakes, many properties were built in the 1970s and 1980s. While they aren’t really fixer-uppers, many of these will need renovations, so it’s wise to think about before committing to an older property. If you fall in love with an older home that needs a lot of work, get a few quotes from contractors before you buy so you know what you’re getting into.
The down payment is probably the biggest chunk of change you’ll need, but that’s not all. Closing costs usually range from 2-4% of the total purchase price of the home. This includes things like homeowners insurance, title fees and more.
You’ll also need an inspection before closing, which usually costs a few hundred dollars but depends on the size of the property. Your lender will also require an appraisal to determine how much the home is worth. You might pay when the appraisal is done, or it might be added into your closing costs.
You don’t have to have perfect credit to buy a home. There are many loans out there that buyers with lower credit scores can qualify for. Some come with additional feels, so talk to a few lenders or mortgage brokers to see which option is best. Bring your real estate agent up to speed early so they can advise you on which properties would be best for your financing situation. Again, it is best to get pre-approved early in the process so you have a better idea of your budget and are ready to make an offer.
You might be more comfortable paying off your existing debts before jumping into homeownership, but it’s not required. When applying for a mortgage, your lender will look at your debt to income ratio. You can calculate this on your own by adding your monthly debt payments and dividing those by your monthly income. Your lender calculates this to make sure you can afford your monthly mortgage payments in addition to what you’re already paying. If your income is high enough that you can easily make all the payments, a student loan won’t affect you getting a mortgage.
When you prequalify for a mortgage, your lender looks at your income, debt, assets, credit score and financial history to see how much you can qualify for. Lenders tend to approve you for the highest amount they think you can afford, but that doesn’t mean you should borrow that much.
Instead, use an online mortgage calculator to get an idea of how much you can actually afford. Think about what you’d like your monthly payment to be, and remember to include principal, interest, taxes and insurance. You should also think about ownership expenses that aren’t part of your monthly payment, like HOA dues and maintenance.
“Location, location, location” is basically the real estate industry’s motto, but it’s not always the best guide for you when buying. Especially in a ski town like Mammoth Lakes, prices can vary quite a bit depending on what housing community you’re in or how close you are to Mammoth Mountain. While you do want to think about resale values of each location, you should choose what’s right for you and your family rather than focusing on resale above all.
Unfortunately most buyers will have to make some compromises. The home that meets every item on your wishlist might be out there, but it’s also probably double or triple your budget. And don’t forget that Mammoth Lakes is a tiny town, so the options can be a bit more limited than in a big city.
I recommend narrowing your wishlist down to the top five things that are important to you, then rank them based on priority. You should also note your absolute deal breakers so your real estate agent can avoid properties that just won’t work.
Whether you’re a first-time buyer or a seasoned homeowner, there’s no reason to go through the home buying process without a strong advocate on your side. Learn more about buying a home in Mammoth Lakes in my Ultimate Home Buyer’s Guide, or call me to start looking for your dream home: (760) 914-4664.
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