Affording a Home
Dispelling Common Home Buying Myths: Affording a Home
Welcome to our guide on debunking the most common myths about affording a home.
Buying a home can feel overwhelming, especially with the amount of misinformation out there. At AAA Capital Funding, we’re here to clear up the confusion and empower you with facts—so you can move forward with confidence.
This section focuses on four common myths related to affording a home and securing a mortgage:
Myth #1: You Need a 20% Down Payment to Buy a Home
Fact: You do not need to put 20% down.
Many first-time home buyers believe they must have 20% of the home’s purchase price as a down payment. However, the truth is far more encouraging:
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FHA loans require as little as 3.5% down for borrowers with a credit score of 580 or higher.
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Conventional loans allow 3% down for first-time buyers, and only 5% down for others.
For example, a 3.5% down payment on a $300,000 home is just $10,500. The right loan—FHA or Conventional—depends on your complete financial picture.
FHA loans also offer greater flexibility:
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Higher debt-to-income allowances
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Leniency with past credit issues
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The ability to use gift funds for down payments and closing costs
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Co-borrower flexibility (such as parents helping)
Don’t let the myth of needing 20% down hold you back from becoming a homeowner.
Myth #2: I Must Pay My Down Payment and Closing Costs Myself
Fact: Down payments and closing costs don’t have to come solely from your savings.
Gift funds and assistance are allowed under most loan programs, especially FHA. Acceptable sources for down payment gifts include:
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Family members
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Employers or labor unions
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Close friends
Sources that cannot contribute include:
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The seller
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Anyone with a financial interest in the transaction (e.g., your real estate agent)
However, sellers can contribute up to 6% of the sales price toward your closing costs. In some cases, your real estate agent may also contribute to your closing costs—just not toward your down payment.
Speak with us to learn how to structure your funding sources. We can guide you through gift documentation and help identify down payment assistance programs.
Myth #3: Renting Is Cheaper Than Buying
Fact: Over time, owning a home is often more cost-effective than renting.
Many people assume renting is more affordable. While rent may seem cheaper month-to-month, that isn’t always the case—especially in markets where rents are rising due to high demand and limited supply.
Here’s how owning compares:
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When you rent, 100% of your payment goes to your landlord. You build no equity.
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When you buy, your mortgage payments build equity over time as you pay down principal and your home’s value appreciates.
Example:
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Renting at $1,600/month = $19,200/year. After 5 years, that’s $96,000 paid with $0 equity.
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Buying a $190,000 home with a $1,400/month mortgage builds over $45,000 in equity over 5 years—based on $15,000 in principal payments and $30,000 in appreciation (assuming 3% annual home value growth).
Homeownership also includes expenses like:
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Property taxes
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Homeowners insurance
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Maintenance
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HOA or condo dues (if applicable)
However, the long-term financial benefits—especially growing equity and price appreciation—often outweigh the costs of renting, particularly if you plan to stay in the home for 4–5 years or more.
We can help you calculate your personal break-even point and build a custom affordability plan.
Myth #4: Lenders Require All Repairs to Be Completed Before Closing
Fact: You can buy a fixer-upper and finance the repairs.
With FHA 203(k) rehabilitation loans, you can finance both the purchase price of the home and the cost of renovations—all in one mortgage.
Two FHA 203(k) Options:
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Standard 203(k): For major renovations (minimum $5,000). Requires a HUD consultant. Covers structural repairs, room additions, kitchen remodels, plumbing, HVAC, foundation work, etc.
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Limited 203(k): For minor, non-structural repairs (up to $35,000). HUD consultant optional. Covers appliance upgrades, window replacements, painting, health/safety improvements, and more.
This loan type is ideal for first-time home buyers looking to invest in an affordable home that needs work. Instead of walking away from a fixer-upper, you can finance the improvements and make the home your own—without paying out-of-pocket upfront.
Ready to Learn More?
If you’re unsure what you qualify for or which loan option is best, contact us at AAA Capital Funding. We’re here to help you understand your financing options and find the right mortgage for your situation.
Let us help you turn homeownership from a dream into a plan.
Ready to Buy a Home with Confidence?
At AAA Capital Funding, we help homebuyers like you feel informed, prepared, and empowered. Whether you’re a first-time buyer or looking to move up, our team will review your financial situation and guide you through every step of the home buying process.
We’re proud to be a trusted local mortgage resource offering personalized advice, answers to frequently asked questions, and insights into the many loan programs available—including FHA, Conventional, VA, and more.
From understanding down payment options to exploring first-time homebuyer tips, we’re here to help you make smart, confident decisions.
Let’s Get Started:
Call us today to discuss your goals and find out which mortgage program is right for you.
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