What They Don't Teach You in School About Home Buying

Here are five things people are telling you about home buying are just aren't true.

Presented by Derek Hirano, Hirano Homes Real Estate

As a real estate agent, I get asked many different questions, and over the years, I’ve noticed there that there is a lot of misinformation out there.  Here is a list of the five most common statements I hear that are simply not true.

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1. You need to have a 20% downpayment.‍

This is one of the most common myths out there. In reality, 20% is what I call the “ideal” amount because at 20% or above, you will usually not be charged PMI (or private mortgage insurance). However, you can qualify for a home loan with a 10% downpayment, 5% downpayment, and sometimes as low as 3.5% (FHA loan) or 0% (VA Loan). There are a variety of loan programs out there that can help you purchase your first home without 20% down.

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2. I need a great credit score to buy a home.‍

It’s true that your credit score matters and can affect the interest rate offered by your lender. Typically, a top-notch credit score will mean you will get the best interest rates. But you do not need an 800+ FICO in order to qualify for a home loan. Some loan programs, such as an FHA loan, only require a minimum score of 580 in order to qualify for their 3.5% down payment programs.

3. All I need is the downpayment to buy a home.‍

While I wish this were true, unfortunately it is not. You may have heard the term “closing costs” mentioned before. This is a catch-all phrase that encompasses the typical costs associated with buying  a home. These costs can include things like lender/loan fees, escrow fees, title insurance, home insurance, appraisal fees, and home inspection fees. In Southern California, I advise my clients to estimate these fees to be roughly 2% of the purchase price. This means if you were buying a $700,000 home, you can expect to pay around $14,000 in closing costs in addition to your downpayment.

4. You need to buy your dream home.‍

Think of the Pinterest-worthy kitchen with a massive Calcatta marble island. Or the Architectural Digest master bathroom with the mosaic tile floors and rainfall shower. Or my dream - the infinity pool overlooking a forest with a Tiger Wood’s-esque backyard with a custom putting green... but for many of us (myself included), this is just a dream.  

Now, this doesn’t mean you should go and buy the first home you see.  It also doesn't mean that just because you can’t get your dream home, you should make an offer on a home you don’t really like. What it does mean is that you should think carefully, and consider and prioritize your home needs. Then, focus on your wants. There is no “perfect house” and there will always be some compromise that will be made. But when we find the home that meets all your needs, and most of your wants - then we will know that is the right one.

5. You do not need a real estate agent‍

Although we can turn to YouTube for most DIY projects, home buying is not one of them. When the process is complicated, and hundreds of thousands of dollars are on the line (Los Angeles real estate is expensive!) it’s important to hire an experienced professional. Each home is unique and has its own story, having someone who has been through the rodeo more than once can help you avoid potential pitfalls and difficult negotiations. An experienced real estate agent can expertly guide you through the homebuying process, help you identify and find your new home, recommend trusted vendors and service providers, and potentially save you thousands of dollars by negotiating on your behalf.  Oh, and did I mention that it’s free? Your agent’s commission is actually paid for by the sellers - so you don’t pay anything! 

Follow Derek on his instagram at: @Derekhirano

Check out his Real Estate business at www.hiranohomes.com

You can reach Derek Hirano at Derek@hiranohomes.com for more information.