Whether buying a home or buying land, many myths surround the process. Thankfully, it’s often a more straightforward process than one may initially think, and while it does come with its own set of challenges, it’s worth the reward.
Here are four common myths about home and land purchases you can stop believing today:
Myth: You Have To Put 20% Down On A House
False! That may have been the case in the past, but depending on the mortgage program you have, a 20% down payment on a house is often no longer required. There are exceptions, such as jumbo loans, where some lenders do require 20% down.
Loans, such as conventional, can be as little as 3% down, and VA and USDA can be as little as zero down for qualified borrowers.
As always, work closely with your lender and realtor to find the best mortgage program for you and your needs.
Myth: Applying For A Mortgage Will Hurt Your Credit
While it is true that applying for a mortgage is a hard inquiry, applying for a mortgage in and of itself will not hurt your credit. A hard inquiry is when a lender requests your credit file to determine how much of a risk you will be as a borrower. Hard inquiries show up on your credit report for two years and can take a few points off of your credit score; it is often not enough to worry about.
Hard inquiries are a part of your credit history but should be used strategically. Too many hard inquiries can elevate your risk as a borrower in addition to a noticeable impact on your credit score.
Myth: You Can Get A Mortgage To Buy Vacant Land
When you purchase land to build your own home, farm, or hunt, you can pay with cash or finance the purchase with a land loan. You will not be able to get a traditional mortgage because there is no home to use as collateral, and it is risky to the lender.
Land loans are different types of loans with their qualifications used for the purchase of land:
- Raw land loan: The land is entirely undeveloped, with no electricity, sewers, or roads.
- Unimproved land loan: The land is similar to raw land but has some utilities and amenities while lacking features like an electric meter.
- Improved land loan: The land has access to roads, electricity, and water and is the most developed type of land.
Land loans are obtained in a similar way to a mortgage loan, but it can be harder to determine the value of the land. Work with a local agent who has experience selling land, like those at Merchant of Homes.
Myth: You Need Special Knowledge To Purchase Land
Purchasing land can seem like a daunting task at first, but like all significant investments, it only requires some education on your part and no special knowledge that only a select few know. Before purchasing land read up on the pros and cons, as well as the risks. Your local agent at Merchant of Homes has the knowledge and expertise to help guide you to a property that meets your needs and wants.