Buying a home is an exceptionally involved process and there are many facts that first time home buyers, in particular, should understand. When clients enlist my help, I start with a home buyer consultation where I educate the buyer on the experience from beginning to end. From a top-level, this includes the following:
- Understanding the clients’ needs and wants
- Setting-up the search
- Discussing the mortgage pre-approval
- Touring homes
- Making the offer
- Using my expertise as a skilled-negotiator
- Walking my client through each contingency phase
- Arranging the closing
- Attending the final walk-through
- Discussing the big move-in day
Often times, during the buyer consultation, I receive many questions from my clients and I’ve noticed several common misconceptions that buyers have. Below are the top five myths about buying a home from my personal experience.
- A 20% Down Payment is Required: In today’s marketplace, the average homeowner will put down 10% on a home. In other words, you are not obligated to put down 20% of the purchase price. There are even mortgage lenders that allow you to put down as little as 3% on a home. So, for example, if you are looking for a home that costs $300,000 you can put as little as $9,000 down. Of course if you are able to put down more, it will lower your monthly mortgage payment, but it is by no means required.
- The Buyer Pays the Real Estate Agent: With our buyers at Real Living City Residential, our clients are under no obligation to pay for their real estate agents’ services. In fact, this expense is a part of the sellers’ costs when selling a home. While there is no set fee, a common commission for real estate agents is six percent of the purchase price of the property. At closing, this fee is paid to the agent by the seller, unless another course of action has been agreed upon by both parties.
- The Down Payment is the Only Upfront Capital Needed: When you begin your plan to purchase a home, understand that there are closing costs involved in addition to the down payment. Closing costs are, on average, a total of five percent of the purchase price. Closing costs in Chicago include tax transfer stamps, attorney fees, the recording fee for the deed and mortgage and more. The inspection fee is another cost that buyers will want to invest in. Feel free to reach out to me for an estimated breakdown of closing costs on a particular home. You will always need to check with your lender, however, for the exact amount.
- It is Cheaper to Rent than Own: Due to the increasing rental prices in Chicago, it is currently less expensive for people to buy than it is to rent. For example, a one bed one bath in the Buena Park neighborhood of Chicago can cost you $1,100 a month with 3% down on a $135,000 purchase price. This includes taxes, insurance and HOA dues. Whereas some renters in this area pay upwards of $1,500 for a one bed one bath. Furthermore, rent is 100 percent an expense; whereas paying the monthly mortgage payment goes toward paying down the principal of the loan. Owners receive that back when they sell their home. Recently, I had clients who purchased their home three years ago for $270,000 and their home was recently appraised by the bank for $340,000. That’s well over $70,000 in equity when factoring in their down payment and monthly mortgage payments!
- It Takes 60 Days to Close on a Home: In today’s market, mortgage lenders can close in as early as 30 days if needed. The average close is 45 days; however, if you are currently renting and need to move into a new home within 30 days, that could be a possibility.
Do you have more questions about purchasing a home as a first time home buyer? Don’t hesitate to reach out to me with questions at firstname.lastname@example.org.