The home buying process can be overwhelming, especially if you have never been through it before and don’t know what to expect. But with the right agent and lender on your side it doesn’t have to be. Here are some frequently asked questions that new buyers first consider when thinking about buying their first home.
1.How much down payment do I need?
a. If you’re sticking to renting right now because you think you’ll need a 20% down payment, I’m here to give you the good news! There are a multitude of first time home buyer programs and grants out there to help with down payment and closing costs assistance. Some loans, you can put as little as 0-3.5% down on your loan. Consult with your lender to get the best loan and program that will be tailored specifically to your needs. Typically when you put less than 20% down, your lender will require mortgage insurance. Certain types of loans such as USDA and FHA will require mortgage insurance.
2. How much can I afford? What is my monthly payment?
a. While you might have an idea of how much you want to spend you won’t know your maximum budget until you get pre-approved. Getting pre-approved can only be done through a bank, but don’t worry, It’s a relatively short process. While it’s not always required to get pre-approved before searching for homes, it is a good idea so you don’t waste time to potentially fall in love with one way out of your price range and vice versa. You may actually be approved for larger loan that you would have thought and the whole time you were searching for homes well under your budget not realizing you could have broadened your home search.
a. Your monthly payment is also something your lender will need to determine for you. There are multiple factors that go into calculating your monthly payment that are house specific. For example, taxes and HOA fees, if applicable. Until you find the home that you want to write an offer on, consult with your agent or lender to get a rough monthly payment estimate.
3. What are closing costs?
a. Closing costs are what the buyer needs to bring to the settlement table in order to purchase a home. Closing costs include the fees associated with obtaining your home loan. The fees include, but are not limited to, points and origination fees, escrow account funds, mortgage insurance, appraisal, taxes, and credit report fees.
4. How long does it take to close on a home?
a. Every situation is different. First, it will depend on in if you finance or purchase in cash outright. It will also depend on if your purchase is a standard sale or short sale. Short sales typically take a longer time period because a bank has to approve the short sale price. Typically, the closing process takes 30-45 days from the day the agreement of sale contract is signed by both parties.
What questions did you consider when thinking about your first home purchase?