Buying a home is one the biggest investments you will likely make in your life, so it’s important to know exactly what it takes if you’re a first-time buyer. Many homebuyers, however, still lack an understanding of the mortgage and home buying basics, like down payment options and how to find a mortgage lender that’s right for them. In fact, FreeandClear’s most recent survey proves that many first-time buyers have a completely outdated perception of the mortgage process.
According to the survey, 20 percent of potential borrowers believe that buying a home requires a down payment of at least 5 percent - but these low down payment options are anything but new. Many programs are (and have been) available for borrowers of several financial backgrounds. More specifically, the FHA has backed mortgages with down payments of 5 percent or less since the 1980s. Conventional loans, or home loans not backed by the government, have offered low down payment options since the 1990s. In other words, with a variety of low down payment programs, getting a mortgage may be more affordable than many first-time buyers expect.
In addition to referring to outdated down payment options, many first-time buyers still use the traditional method of calculating income used for housing. When asked what percent of income should be applied towards housing costs and other debt repayment, more than half of respondents said 34 percent. Today, however, industry experts suggest spending a maximum of 43 percent on these expenses. This means many homeowners may have the ability to buy more home than they initially expected!
Overall, since many first-time homebuyers have an outdated understanding of the mortgage process, it’s important to ensure that you stay up-to-date on mortgage news prior to buying. For more information about the mortgage process, or to learn more about home financing, contact one of our mortgage specialists or check out our selection of home buying resources today.