Many young adults today, including Generation Z and Millennials, struggle with the belief that homeownership is out of reach. This feeling is often fueled by misconceptions and outdated information about the real estate market. FOX 5 real estate expert John Adams visited Good Day to separate fact from fiction.
The path to home ownership is a real challenge for young people today. Property prices are exploding, interest rates have doubled in recent years and the supply of homes for entry-level buyers is only a fraction of what it should be. So competition is tough.
Adams says it’s important to remember that many of today’s first-time home buyers grew up during the Great Recession of 2008 and remember when home prices plummeted. That market cast a shadow over the housing market that hasn’t lifted yet.
That experience was real, but things are different today. And Adams has identified three common misconceptions that many first-time buyers have:
Myth 1: Interest rates are at an all-time high
It is widely believed that current mortgage rates are higher than ever before. However, this perception is misleading. In the past, interest rates have peaked at much higher levels. In October 1981, for example, interest rates rose to 18.63% – a far cry from today’s rates, which are closer to 6.75%. While today’s rates are higher than the record lows of 2.65% seen in 2021, they are relatively moderate compared to past decades.
Interest rates fluctuate, and while they can rise or fall, waiting for interest rates to drop significantly can result in higher home prices. It’s often more practical to buy a home now and consider refinancing later when interest rates drop.
Myth 2: A 20% deposit is required
Many potential buyers believe that a 20% down payment is required to purchase a home. In reality, there are several options that require significantly less. For example, FHA loans require only 3.5% down, and VA and USDA loans may not require a down payment at all, although they have certain eligibility rules.
Programs like Conventional 97, HomeReady and HomePossible allow down payments as low as 3%, making home ownership more affordable than many people realize. Potential buyers should be sure to learn about these options and consult with experts who can help them navigate the buying process.
Myth 3: Perfect creditworthiness is a must for a mortgage
Another misconception is that only people with excellent credit can get a mortgage. In fact, there are mortgage options for people with lower credit scores. For example, FHA loans are available to people with a credit score as low as 580 with a 3.5% down payment, or even 500 with a higher down payment. VA and USDA loans also have no minimum credit score requirements.
The key is to evaluate the entire mortgage package and consider different programs that may offer down payment assistance or other benefits. It’s important to work with knowledgeable professionals who can provide advice tailored to your individual financial situation and goals.
By addressing these myths and gaining a clearer understanding of the home buying process, younger generations can approach homeownership with greater confidence and make informed decisions that fit their financial capabilities and long-term plans.
The bottom line is, don’t give up. Meet with a real estate agent and learn the truth about buying a home in today’s market. Then meet with a mortgage lender to talk about pre-qualification. That’s the next step if you want to get started!
Atlanta native John Adams has been a real estate agent and investor in residential real estate for four decades.
