8 Home-Buying Facts That Might Surprise You

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Mike Romano

Oct 5, 2023

Mike Romano is a mortgage industry veteran with over 20 years of experience. His expertise spans mortgage technology, credit risk, and loan origination, and he has spoken at many mortgage and fintech conferences. He has a Bachelor's and MBA from the University of California, Berkeley and currently resides in Austin, TX. NMLS # 2515901

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    There are plenty of home-buying myths out there. But there are also plenty of surprising, hidden, and downright life-changing facts about buying a house that many people either misunderstand or are simply unaware of altogether.

    We won’t bust any myths today, but we will shed light on the most important home-buying facts everyone should know before they purchase. We hope this helps you make more informed decisions on your journey toward homeownership.

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      Fact #1: Homeowners have a much higher net worth than renters

      According to data from the National Reserve, homeowners have roughly 40 times more net worth than renters. 

      It’s a mind-boggling stat, but it makes sense. As Lawrence Yun, chief economist for the National Association of Realtors, puts it: “A monthly mortgage payment is often considered a forced savings account.” 

      While homeowners are busy building equity and reaping the benefits of stable housing costs, rising rents squeeze many non-homeowners even further.

      In 2022, rents rose an average of 5.45% nationwide, which is faster than inflation rose during the same time period. In some markets, rents saw double-digit increases in the last year. This squeeze at least partially explains why renters are also less likely to have retirement savings compared to their home-owning counterparts.  

      Buying a home is a big leap, but for many people, the long-term financial stability is well worth it. 

      Fact #2: It’s possible to buy a home with no credit history

      Buying a home without a credit history is challenging, but it’s not necessarily impossible.

      First, it’s essential to understand that having no credit history is different from having bad credit. If you have no credit history, lenders don’t have a track record they can use to assess your financial responsibility. However, you might be able to overcome this by proving your creditworthiness through other methods.

      Start by paying your bills on time, maintaining a stable job and income, and saving for a down payment. Having money saved for a down payment is a significant asset, especially for buyers with no credit, as it reduces the lender’s risk.

      When you’re ready to apply for a loan, carefully consider your choice of lender. Some lenders specialize in working with borrowers who have little or no credit histories. These lenders often use atypical indicators to make a loan decision. 

      Additionally, consider financing options that have more flexible credit requirements, such as FHA loans or special purpose credit programs. These loan programs are designed to help make homeownership possible for buyers with less financial strength or history. As such, they often consider factors beyond traditional credit scores.

      If none of these options work for you, begin taking steps now to build your credit history before you buy a home. You can build credit relatively quickly using a handful of simple strategies. 

      Fact #3: Your mortgage can improve your credit score

      Some people mistakenly believe that buying a home will tank their credit because the loan will show up as a massive liability on a credit report.

      However, a mortgage loan isn’t weighted the same as consumer debt on your credit report. Also, making your mortgage payments on time each month contributes to a healthy payment history, which improves your credit score relatively quickly. 

      Your credit score might drop just a bit when you first purchase your home, but it will recover after you’ve made your mortgage payments on time for a while. Eventually, assuming your financial position doesn’t change much in other areas, your credit score will likely end up higher than before you bought your house.

      Fact #4: Your mortgage isn’t the only homeownership expense

      When people think about how much it will cost to own a home, they usually think about the monthly mortgage payment, specifically the principal and interest. 

      It’s common, at least in the early stages of the home-buying process, to forget about other regular costs like property taxes, homeowner’s insurance, and in some cases, private mortgage insurance. 

      Even the most diligent homebuyers also sometimes forget to factor in the cost of maintenance and repairs. If you own a house long enough, something will inevitably need to be replaced or repaired, and that something could wind up costing you quite a bit of money. 

      It’s best to plan for these repairs by treating them as a monthly expense. When you work out your home-buying budget, allocate money each month for repairs. This way, you’ll get a more accurate picture of how much it will cost to own your home month to month. 

      Another option to consider is a Home Warranty. A Home Warranty is a policy, paid for by the homeowner, that covers the cost of repairing many home appliances if they break down. 

      If you follow through on this budget, you’ll have money squirreled away to help you absorb repair expenses when they do come up.

      Fact #5: Schools in the area matter, even if you don’t have kids

      Many homebuyers who do not have children don’t bother to look at the schools in the area before they purchase a home. However, local schools impact home values.

      Home values in areas with better school systems tend to increase faster than in areas with lower-ranking ones. So it’s worth looking at the schools in the area, even if you don’t plan on having children, because it can help you build equity and get the most value from your home purchase.

      Fact #6: There is such a thing as a no-closing-cost mortgage

      If you’ve done any research into buying a home, you’ve probably heard about closing costs. One option that often piques the interest of potential homebuyers is the “no-closing-cost” mortgage loan.

      No-closing-cost mortgage loans are designed to reduce the upfront financial burden associated with buying a home, and they do reduce the out-of-pocket costs you must pay at closing time. For this reason, they can be very useful for some homebuyers. 

      That being said, the name is a bit misleading. Even if you take out a no-closing-cost mortgage, you still have to pay the closing costs. You won’t be required to pay the traditional closing fees at the time of sale. Instead, the costs are added to your loan amount or paid by the lender in exchange for a slightly higher interest rate.

      This approach can provide financial relief at the outset, but it’s critical to consider the long-term implications. 

      Increasing your loan amount or increasing your interest rate gives you higher monthly payments. Since you accrue interest on the additional loan amount, you end up paying more than if you had taken care of the closing costs upfront.

      Ultimately, a no-closing-cost mortgage is a tradeoff. If you need help covering closing costs or making a larger down payment, you’re probably better off getting down payment assistance

      Many down payment assistance programs offer forgivable loans or grants, so you can use the money to pay closing costs upfront without weakening your long-term financial position.

      Learn more about your down payment assistance options.

      Fact #7: Making the largest down payment you can afford isn’t always best

      It’s easy to think that you should put all of your savings toward your down payment. Intuitively, this makes sense. You saved that money for a down payment, and a larger down payment means a smaller loan.

      However, the size of your down payment is a strategic choice, and it’s sometimes more beneficial to put down a smaller amount. 

      Most conventional loan programs offer a reduced interest rate at the 5%, 10%, and 20% mark, with a 20% down payment netting you the lowest interest rate. Increasing your down payment from, say, 5% to 6% likely won’t get you a lower interest rate and it will have a very small impact on your monthly payments.

      Moreover, making a smaller down payment now, rather than waiting to save up more money, enables you to enter the housing market sooner and start building equity right away. The longer you own your home, the more likely you are to build significant equity, so the sooner you can start, the better. 

      Making a smaller down payment and keeping some cash on hand also gives you more flexibility to pay urgent expenses or invest in other assets. The size of your down payment is a decision you should make strategically, with your overall financial strategy and aspirations in mind.

      If you need help, your lender can help you run the numbers based on your situation.

      Fact #8: Many homebuyers can get help with their down payment

      No matter how much money you need for your down payment, saving up that money can be a huge challenge. Many buyers qualify for down payment assistance to help them get into a home sooner. 

      Down payment assistance programs are designed to help people purchase a home by relieving the financial burden of a down payment. As such, the qualification requirements are set so that the largest number of homebuyers can take advantage of the assistance.

      Most down payment assistance programs have reasonable credit requirements, usually in the range of 600 to 640, and some programs have no specific credit requirements at all. Additionally, there are assistance programs available in every state, funded by government and private organizations.

      The biggest challenge to getting down payment assistance is figuring out which programs are available in your area and which lenders work with those programs. 

      Stairs Financial solves this problem on both fronts. 

      Stairs streamlines your access to down payment assistance, making it easy for you to connect with a trusted lender and compare the loan and assistance programs you may qualify for, all in one place.

      Learn more about your down payment assistance options.

      Find up to $15,000 towards a home 🏠

      Compare local down payment assistance and find a mortgage, fast.

      Where do you want to buy?
        Search by ZIP code, address, city, county, or neighborhood
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