Top 5 Myths when Buying your NEW HOME!!

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Top 5 Myths when Buying your NEW HOME!!

Jaime Schekaiban • Jul 21, 2021

Stop believing on these Myths to buy a house and see the REALITY of the situation!!

Now that interest rates are lower than ever, everyone is buying a house! But there are some myths out there that make a lot of people get excluded and feel like they can NEVER own a house.

In this post, I will not only tell you what these myths are, but I will give you a reality check and the best way to act so you can get the best deal for your new home!

Buying a house is always a big step. It’s not like buying a car or any other expensive item because you need to make a commitment. A commitment to the lender, and a commitment to settle at a certain place. When you rent, you can easily walk away and leave, even by breaking the lease. But getting into a mortgage means you have a REASON, it could be family, it could be Financial, you name it.

These are the TOP 5 MYTHS you should be aware when buying your new home and their REALITY CHECK!

Myth #1: YOU NEED A 20% DOWN

The median home in the US is around $385,000. It will take you around $77,000 in cash to be able to afford a down payment for a home. Not many people have that kind of money laying around in their accounts.

And another thing to take into account is that it is not only the down payment you need to pay when you close a mortgage. You also have closing costs, title fees, and other fees. Realistically, you need around 31% down to cover everything.

Some people get scared and do not buy. Then, they keep saving and something pops up. The keep saving again and again, and things continue to pop up and they spend the money. So, they never end up buying because they need that 31% down.

Now let me tell you the REALITY CHECK for this myth. You don’t need a 20% down to buy a home. You can get a loan with a 3.5% down from FHA or 3% conventional if your credit is solid.

The problem here is being able to afford the payments. Let me give you an example. I used this calculator here and assume we buy a $300,000 home with a 30-year mortgage, 3% interest, and 20% down. Adding property taxes and insurance, you will pay around $1,761.85 per month.

If you changed this to a 3.5% down with an FHA loan, you will add a fee which I reflect it there using a .81% of PMI. It is not called PMI per say, buy it does the job. You will end up paying $2,165.95 per month.

That’s $2,165.95 vs $1,761.85, a $400 difference. Remember a house payment should not account for more than 28% of your net income. Just to be able to afford the 20% down you need to be making around $88,000 a year net. The other option goes over six figures. My question is: can you afford that change?? Comment below!

Myth #2 You need to be in a 30-year mortgage

True, you can get a mortgage for 15 years. First question is: who does? Second question is: why? The reality check for this myth is that if you want to pay off the house faster, you get a 30-year mortgage that doesn’t tie much of your income and make additional payments until you pay it off.

If there is one or two months where you don’t have extra money to put on your mortgage, it’s OK. You can just pay the lower payment for 30 years than be stuck with a 15-year big mortgage obligation.

Get a 30-year mortgage, get the lowest interest rate your credit can give you, and then put extra payments at ease. Don’t force yourself to be broke just to be able to make the payments.

Myth #3 Your credit score needs to be 800 to qualify

Right now, anyone can get free money. Don’t be hesitant to ask. And yes, the credit score you need to have in order to qualify for a loan is 500 or more. If you are looking for a 2.5 – 3% interest rate, then you need to be over 650.

If your credit score sucks because you followed Dave Ramsey’s advice and never used a credit card in your life and paid all cash which is the most stupid idea I’ve ever heard, then you need to put down a bigger down payment.

With a bigger down payment and enough collateral, meaning you have money in accounts, or your DTI is low, debt to income ratio, you can get a house with little to no credit.

Now, the REALITY CHECK of this myth is that CREDIT SCORES matter in this country a lot. Dave Ramsey doesn’t think you are capable enough to handle a credit card, that’s why he is telling you to cancel them and not use them. I tell you, use one and pay it in full so you can have a credit score over 650 and get your 2.5-3% interest rate on your house!

Myth #4 You cannot buy a HOME if you have Student Loan Debt

This is a myth, and it is absolutely certain that you can buy whatever you want having as much debt as you want. The problem here is something I mentioned before called DTI ratio. The debt-to-income ratio is how much you owe relative to how much you make.

If your DTI ratio is under 28% without the loan and will turn out to be 36% or less with the mortgage payment, then you will qualify for the loan.

If you are higher than 36%, you can still look for specific private lenders who will lend you the money at either higher down payment or higher interest.

Now, the reality check. If you have student loan debt, if you have credit card debt or any kind of loan you took, if your DTI is higher than 30% now when you are renting, don’t even think of getting into a mortgage.

First, keep renting a cheap place or sharing a place with someone and put your SHAIT together. Adding a mortgage to the mix even if you get qualified will KILL YOU financially.

Stop buying lattes, stop buying $10 shots at the bar and expensive organic meat and apples and put all that money into the loans. Once you pay them off and you get trained on how to save money, you can start your house buying process.

People always say RIGHT NOW IT’S THE BEST TIME TO BUY A HOUSE!!! Only 3 kinds of people say that: 1. Realtors because they live out of commissions from selling you the house 2. Financial Guys because they make money for every mortgage signed, and 3. Stupid people that don’t know what the hell they are talking about.

The best time for you to buy a house is WHEN YOU ARE FINANCIALLY AND MENTALLY PREPARED to do it. If the interest rate is 2%, 3%, 4% who cares???? You will be better with money and making more anyway!

Myth #5 You only need to budget for Down Payment and Closing Costs

This is where PIGS get slaughtered!! It is true, you don’t only need to budget the down payment and closing costs, there are plenty of other things to have in mind as well.

First, you need to move, that costs money. Then, you need furniture and décor for the house. It is so sad to see people moving to a nice house and all they have is a chair, a plastic table and an inflatable mattress on the floor for 6 months.

The reality check of this myth is that a house is not an investment, it is a money drain. It is a necessary evil just like a Car. But Jaime, in 30 years my house will be worth three times what it is worth today!!! Yep, but you would’ve already blown all that money in Taxes, Insurance, Repairs and BS for the house.

Foreigner Insight

These 5 myths are true, and I loved them, that is why I wanted to record this video to talk about them, because they are scaring people from buying their first home. Renting is a waste of money if you are already Mentally and Financially ready to buy a house and you are just scared to do so.

When you rent, you make landlords like myself really, really happy. Thank you for your cooperation!! But the reality is that if you buy a house at the wrong time, you kill your life. You will need to work your butt off for 30 years just to pay the obligation. Don’t do that.

Rent for as much as you need, pay cheap, pay off loans and debt. Once you are ready to settle, mentally, and you trained your pocket to behave, then follow the advice in this video!!

Make sure you do a housewarming party to show your friends around!!