Brought to you by Movement Mortgage.
Ready to purchase a home? Congratulations — it’s an exciting but daunting time, and you probably have a ton of questions. Down payments, qualifications, costs, and interest rates all sound scarier than they actually are when you don’t know who to ask for advice. We sat down with loan officer Michael Nasserfar from Movement Mortgage to dispel some of the most common misconceptions about financing to ensure that you have the utmost confidence on your new home journey.
Myth #1: You need to put down a minimum of 20% for financing.
In the past, putting 20% down was a requirement as banks tried to mitigate their exposure risk when lending to homebuyers, but not anymore. “Most buyers think they have to put 20% down for financing or to get ‘good’ financing, but this is nothing more than a common misconception,” says Nasserfar. “There are a variety of loan programs available with as little as 3% down for Conventional, 3.5% down for FHA, and even some zero-down programs such as VA Financing and USDA loans.”
Myth #2: You don’t qualify as a first-time homebuyer.
There are some financing programs that do require you to be a first-time homebuyer to use, but there are even more that do not make this a prerequisite. “The good news is that when it comes to financing a new home, there are no stipulations that state you must be a first-time homebuyer,” says Nasserfar. “Many of the first-time homebuyer financing programs reset a few years after you’ve purchased a home, at which point you can requalify.”
Myth #3: You don’t have the money for a down payment right now, so you have to wait to buy until you have 100% of the funds needed.
Did you know that you can save up for your down payment while your new home is being built? “Contrary to what some may think, 100% of your down payment funds are not needed until your home is completed and you’re ready to finish the loan process,” says Nasserfar. “If you need time to save up, take advantage of the construction timeline on your home to get there.”
Myth #4: New homes are more expensive than resale homes.
Now more than ever, the market is proving this statement false. “New-build homes can provide far more value when you consider all the special features and finishes you may not find in a resale,” says Nasserfar. Think green-built homes and energy-saving warranties or incentives. “With a resale, an individual would have to spend a lot more for a balanced offer compared to a new-construction home. When you’re comparing apples to apples, a new home is far less expensive than a resale property.”
Myth #5: Interest rates are way too high to buy and the payments are out of my budget.
Historically speaking, current market interest rates are low. Just ask anyone who purchased a home in the 1980’s when rates ranged from 10% to almost 19%. “With mortgage interest rates averaging around 8% historically, current rates are substantially lower in comparison,” says Nasserfar. “What’s more is there are many incentive programs to help you yield a lower rate than what the market is currently offering, helping you save money and drive your new mortgage payment as low as possible.”
One incentive program is a rate buydown which lowers your interest rate for the first year and then increases slightly per year until the final and fixed rate period takes place. This program allows you to take advantage of low home prices and low payments. “If and when the rates drop, you can refinance into a lower monthly payment for the remainder of the term when the opportunity is available,” says Nasserfar. “This specific rate buydown holds your funds in an escrow account so if and when you refinance, the balance of the escrow fund is applied to your principal balance.” This way, you won’t lose any of your incentives like a permanent rate buydown.
About Michael Nasserfar
Michael Nasserfar is an experienced Loan Officer with Movement Mortgage, Empire’s preferred lender in the Austin and San Antonio area. With his help, you can better understand what you can qualify for. Looking to get in touch with one of our other preferred lenders in Houston? Click here.