Oftentimes, the thought of homeownership seems daunting and many questions come to mind. What is the best route to take? Where should I buy? Would I make a good landlord? What type of property should I purchase? Should I start to invest in real estate?
I write this post to help debunk certain myths about the home buying process to make it a little less intimidating. Hopefully, after reading this article, you will feel more comfortable making a more informed decision. Although buying property is a personal decision, to help you frame the conversation I want to use an imaginary example. Meet Sally.
Let’s say Sally is a recent graduate and has landed a good paying accounting job in Pittsburgh. After accumulating some savings, Sally wants to explore homeownership. She is familiar with her neighborhood she rents in, but being from out of state wants to explore up and coming neighborhoods in Pittsburgh. She has saved some money, but is unsure how much money she will need to put down or what type of loan to get. She has an idea where she wants to live, but is unsure if a single family residence or condo is the way to go. She knows where she feels comfortable living, but wants to explore up and coming neighborhoods close to public transportation in Pittsburgh. She needs some assistance with the process, but doesn’t want to pay a “broker fee.”
Now that we know a little bit more about Sally, let’s try to work our way through some of her concerns.
Myth #1: Sally needs 20% down to buy any property.
No. No. No.
This myth is the metaphorical Lock Ness Monster of real estate buying. Let’s read this myth a bedtime story and put it to bed for good. Banks will lend to buyers in the market for single family properties for as little as 3% down. For a $100,000 property, that would be only $3,000 of principle needed to close (in addition to other closing costs that would be thoroughly explained to the buyer prior to closing). Some employers also subsidize programs where they will give you money towards your closing. If that’s still not good enough, you and your agent can also negotiate seller’s assist your offer. Seller’s assist is when the seller of the property will literally give a buyer money to use towards their closing costs. There is one small negative associated with putting less than 20% down on a mortgage and that is the borrower will have to pay mortgage insurance on a monthly basis.
For greater transparency on what your month to month payment would be or how much money you would need to use on closing, make sure to reach out to a mortgage professional in your area.
Myth #2: Sally will have to pay a fee or an hourly wage to be assisted by a buyer’s agent.
As an agent, this is also a myth that I routinely debunk. As a buyer, you do not pay the buyer’s agent a dollar. The buyer’s agent is paid at closing and is paid on commission. That means that the buyer’s agent (and seller’s agent) is paid based on a percentage of the total commission PAID BY THE SELLER upon sale of the property.
BUYER BEWARE: Some larger agencies will force buyers to pay a mysterious “admin fee.” Working with a small brokerage like BC Artman Real Estate will help you avoid paying pointless fees for the exact same service a larger brokerage provide.
Myth #3: Buying a Single Family property vs. condo is exactly the same.
Procedurally, condos and single families are purchased in the exact same way. The major difference with these two scenarios is that condos typically include the payment of an additional fee on a monthly basis. This fee is called an HOA fee or HOA due. A homeowners association fee (HOA fee) is an amount of money that must be paid monthly by an owner of certain types of residential properties. HOAs collect these fees to assist with maintaining and improving properties in the association.
Your agent and mortgage professional should provide a cost sheet to you prior to submitting an offer so that you are fully aware of what your will be paying prior to making your offer.
Hopefully this post will make the home buying process a little less intimidating for you. If you’re not currently working with an agent, please don’t hesitate to reach out to me directly so that I can help answer some additional questions you may have. Here is a link to my agent profile on our company website Jordan Kelly – B.C. Artman and Company.