Buyer
Frequently Asked Questions
If you’re in the market to buy your first home, you’re likely feeling overcome with emotions, questions, and possibly even some worry. After all, you’ve undoubtedly been advised that buying a home is one of the largest purchases you’ll ever make. To help guide first-time homebuyers through their big-time purchase, I’ve compiled a list of some of the most frequently asked questions I’ve received.
Am I Ready to Be a Homeowner?
If you’re in the market to buy your first home, you’re likely feeling overcome with emotions, questions and possibly even some worry. After all, you’ve undoubtedly been advised that buying a home is one of the largest purchases you’ll ever make. To help guide first-time homebuyers through their big-time purchase, I’ve compiled a list of some of the most-frequently asked questions I’ve received.
How much money do I need for a down payment?
The amount of money you’ll need to put down on a new home depends on the price of the home you select, along with the mortgage terms that you’re approved for. Different lenders offer different loan options that may allow a buyer to put as little as 3-5% down or even less. However, you may encounter private mortgage insurance (PMI) during part of your loan, which will add on to your monthly mortgage payment until you pay off the PMI.
How Does My Credit Score Fit In?
Your credit score has a big influence on whether you’ll be approved to buy your first home. According to the Home Buying Institute, a score of 620 will usually get you in the door with lenders. But to get the best rates, you’ll probably need a score of at least 740 to qualify. Your credit score will influence the amount of interest you will pay on the loan.
Is there a difference between an appraisal and an inspection?
Yes. A home inspector is usually confused with a real estate appraiser. A home inspector determines the condition of a structure, whereas an appraiser determines the value of a property. You will most likely need both when buying your first home, and you’ll be paying for both as well.
Do I really need a Realtor when buying a home?
When buying a home, it’s strongly recommended you have a Realtor. There are many reasons why you should have a Realtor represent your best interests when buying a home. A real estate agent is equal parts a coordinator, a negotiator, and an advocate. Depending on whether you are buying or selling your home, your real estate agent will take on different roles throughout the transaction. However, what stays true regardless of what side of the table you are on is that they are always going to be working in your best interest.
IS RENTING OR BUYING BETTER?
The real estate market is constantly changing, but oftentimes, it is more cost-efficient to buy a home rather than rent one. Think about it. When you buy, you are investing in your own future. When you rent, you are helping your landlord to invest in his or her future! There also are financial perks like tax deductions and home equity that come along with owning a home.
How do I know how much home I can afford?
So that you don’t enter the home-buying process blindly, it is a good idea to meet with a bank or lender, who can help you determine a range of home prices that you may be approved to buy-in. Lenders will consider how much a buyer makes, how much debt they have, any assets they own, and their credit history before issuing a preapproval letter, which details the amount they can purchase, providing their financial picture does not drastically change during the home-buying process.
How long does it take to buy a house?
Longer than you think. This is not an easy question to answer because every home sale is truly different. After you finally find a home you want to buy and your offer is accepted, it can typically take 30 – 45 days to close on your loan. So, if it takes 4 months to find a home you like, it will take probably another 1 month to close.
What is the difference between pre-qualified and pre-approved?
Pre-qualification: Getting pre-qualified for a mortgage gives first-time homebuyers an indication of how much they “might” qualify to borrow. This mortgage amount is not guaranteed because no information has yet been verified. A letter from the lender may only state that you are “likely” to be approved for a mortgage.
Pre-approved: Better yet is getting pre-approved for a mortgage, which is based on a real credit score, and it also puts real estate agents and home sellers at ease. The buyer has more to offer when making a deal and in a competitive market this can be a definite plus.
What’s the first step I should take?
Unless you plan on paying with cash, your first step will be to get pre-approved for a loan. Once you get pre-approved, you will know with more accuracy the price of the home you can afford.