M. Dean Vincent: Avoid falling for common myths


Experienced Realtors invest considerable time educating buyers about common falsehoods that too often haunt and stall the home buying process. The myths include:

  • The down payment is the only upfront cost when buying a home.

Buyers need to be prepared for multiple expenses – from fees, taxes, costs related to inspections, credit reports, insurance and more. Closing costs alone can be anywhere from 3 percent to 6 percent of the purchase price, depending on where the home is purchased.

  • There’s nothing to lose by casually looking for a home without guidance.

Inexperienced buyers house hunt to get a feel for the area before sitting down with a Realtor. But that could be a major waste of time, and it may set the homebuyer up for major heartbreak. Without first knowing their budget and the size of a loan a lender would approve, prospective buyers might view homes they simply cannot afford.

Why get excited about homes outside an affordable price range? Before hunting, work with a Realtor to get pre-approved for a home loan.

  • Buying is impossible without a 20 percent down payment.

That statement simply is not true. Yes, a 20 percent down payment will help a buyer avoid paying private mortgage insurance, but 20 percent down is not required. Many lenders will still qualify a buyer for home loans with 10 percent or 5 percent down. Some buyers can even qualify with only 3.5 percent down for a Federal Housing Administration loan. There are multiple options for down payment assistance that lenders can explore with a buyer who has limited savings.

  • Schools are irrelevant if the buyer does not have children.

Good schools indicate a solid neighborhood while often enhancing an owner’s ability to sell years later.

Buyers should explore all factors with their Realtor on issues that could influence a home’s appreciation and desirability so they don’t run into trouble on the day it’s their turn to sell.

  • It’s OK to skip getting a home inspection.

With today’s limited inventory and highly competitive market, some buyers may offer to waive the home inspection thinking it gives them an advantage against competing bids.

Sellers like that offer, but it can be an unwise decision for the buyer. It means the buyer accepts the house as is, including all problems, some of which may be visible while other issues may be hidden — issues that only an inspection could uncover. Send additional “myths” to [email protected].

Higher prices offset low rates

Lower interest rates failed to offset strong seasonal price increases, making it harder for Californians to purchase a home in the second quarter of 2016.

  • Thirty-one percent of California households could afford to purchase the $516,220 median-priced home in the second quarter, down from 34 percent in first-quarter 2016 and up from 30 percent in the second-quarter of 2015.
  • A minimum annual income of $101,217 was needed to make monthly payments of $2,530, including principal, interest and taxes on a 30-year fixed-rate mortgage at 3.85 percent interest rate. It was the first time since the great recession that minimum annual income required to purchase hit six digits.
  • Forty percent of homebuyers were able to purchase the $411,390 median-priced condo or townhome. An annual income of $80,663 was required to make a monthly payment of $2,017.

This is the 13th consecutive quarter that the index has been below 40 percent and is near the mid-2008 low level of 29 percent. California’s housing affordability index hit a peak of 56 percent in the first quarter of 2012, according to the California Association of Realtors.

Dean Vincent is President of the Santa Clarita Valley Division of the 9,500-member Southland Regional Association of Realtors. David Walker, of Walker Associates, co-authors articles for SRAR. The column represents SRAR’s views and not necessarily those of The Signal. The column contains general information about the real estate market and is not intended to replace advice from your Realtor or other realty related professionals.

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