There are numerous sayings, adages, and myths that prevail in the real estate industry. These are usually spread by homeowners who think they understand everything about Real Estate simply because they have purchased a home once or twice. If it was true during their experience, it's automatically a fact! However, every real estate experience is different, and some "facts" that are thrown around aren't actually facts... they're just myths! Landmark Home Warranty has found the five most common myths about the home buying experience and BUSTED them below.
Buying is Always Better Than Renting
One of the most prevalent myths in the housing industry is that buying a home is always better than renting. The problem? It completely depends on your circumstances. In some circumstances, renting is a far better option and will end up saving you money in the long run. For example, if you're only going to be living in a home for a year, it's most likely a smarter financial decision to rent a home. However, if you're planning on living in a home for a longer period of time, the house will most likely appreciate its value and you’ll end up building equity if you buy. The buying vs. renting debate isn’t just about the length of time you spend in the home, either. There are numerous factors that go into determining if buying or renting a home is best for you, including the price of the home, your budget for mortgage payments, insurance, and maintenance, your credit score, and what mortgages for which you’re qualified. Depending on each of those factors, it could be that you're better off renting than buying a house!
Download Landmark's Step-by-Step Guide to Determining if You Should Rent or Buy whitepaper here.
So, buying is always better than renting? Myth busted! Whether it’s a better financial decision to buy or rent completely depends on your particular situation.
If You Rent, You Don't Pay Property Taxes
When you purchase a home, if you have a mortgage payment, your payment is generally divided up between:
- Property Taxes
- Mortgage insurance (if you put less than 20% down for a down payment.)
If you don’t have a mortgage, you are still required to pay property taxes on your home.
Renters often believe that because they don’t own the home, they’re not paying the property taxes on the house.
Not so much! When you rent a home, your landlord factors in a number of expenses into your monthly rent like property taxes and maintenance costs. You might not be sending a check to the state government specifically for a tax payment, but your rent will be used to pay the owner’s property taxes.
So, does renting means you don't have to pay property tax? Even though it’s not specifically a part of your rent payment, your landlord has probably still factored it into your month's rent. Myth busted!
Home Maintenance is Expensive
When considering purchasing a home, many individuals are scared off by the prospect of being responsible for the upkeep and maintenance of a house. When you rent a home and your furnace goes out, you call your landlord. He or she will arrange to have it fixed, without any expense coming out of your pocket. However, when you own your own home, there is no landlord, you are solely responsible to fix the broken-down system or appliance. When something fails, you learn that you either have to go without it or pay to get it repaired or replaced. According to US News, a homeowner can expect to pay between 1 and 4 percent of their property value on maintenance, repairs, and replacements of systems and appliances within a home.
While that is a sobering number for many home buyers, here’s the secret: home maintenance doesn’t have to be expensive. Many homeowners decide to purchase a home warranty to protect their budget against unexpected failures of their systems and appliances. A home warranty will repair or replace a home's failed systems and appliances for a small service call fee as long as the system or appliance failed from normal wear and tear. A home warranty protects a homeowner from having to pay thousands of dollars when their air conditioner breaks down from old age.
The average home price in San Antonio, Texas is $324,398. Using the 1-4% rule, a homeowner would expect to pay between $3,243 and $12,975 a year on home maintenance. Compare that to between $300-$600 a year on a home warranty. You can save thousands of dollars on home maintenance with a home warranty. A home warranty makes repairs and replacements manageable.
Home maintenance also increases a home's value. As you repair and replace systems and appliances within your house, it increases its value while you pay the same amount of money for a mortgage payment. If the landlord of your rental home did the same upgrades, it would reflect in your month's rent.
So, is home maintenance expensive? It doesn't have to be with a home warranty. Myth busted!
Always Buy a Home When the Market is Hot
It seems that everyone bases their decision to buy a home off of housing market trends. However, if you buy a home when the market is hot, and not because you have the financial stability to do so, it's the wrong time to buy a house. No matter what the market looks like, make sure that you can afford the payments for a house, and purchasing is the right financial decision. By waiting until you can afford to purchase a home, you’re going to be in a better situation than if you purchase when it’s a “buyer’s market.”
You can see if you’re ready to purchase a home with Landmark Home Warranty’s worksheet Calculate How Much to Spend on Monthly Home Costs.
So, buying when the market is hot? Only if your financial situation is also in a sweet spot. Myth busted!
You Have Put 20% Down Payment When Purchasing a Home
In years past, the traditional mortgage was a 30-year fixed-rate mortgage with a 20% down payment. That means 20% of the home’s purchase price being paid directly to the mortgage lender. Now, different mortgages with different down payment percentages are commonplace and make it easier than ever for young professionals without a ton in savings to purchase a home. Some government-run mortgages allow first-time homeowners to purchase a home with little more than a 3.5% down payment or less.
So, do you need to put a 20% down payment on a home when you buy? No! Depending on your credit history, you could find a mortgage that doesn’t require a down payment at all. Myth busted!
Now that we’ve busted some of the most prevalent myths that surround the home buying industry, you may be feeling more confident in purchasing a home! Read more about buying a home with Landmark’s resources on buying and selling homes here. If you decide to purchase a home, get home warranty coverage from the best home warranty company in Arizona, Idaho, Oregon, Nevada, Texas, and Utah: Landmark! Order a home warranty, today!