First Time Home Buyer FAQ
Buying your first home is one of the most important financial decisions you will ever make. The process can feel overwhelming, and many first time buyers are full of questions. Sometimes first time homebuyers aren’t even sure what they should be asking. Doing your research ahead of time, as well as asking yourself some tough questions, can make you feel much more confident.
How Much Home Can You Actually Afford?
When you start browsing property websites, you’ll see listing prices, but you need to do a little more math to figure out how much you can actually afford. Your monthly mortgage payment shouldn’t exceed 25% of your income (and your total debt, including cars, school loans, and credit cards shouldn’t exceed more than 33%). If a mortgage calculator puts you into a place you can’t afford, adjust your budget.
What Should You Consider When Making an Offer?
Your agent will guide you through the negotiation process. This is where having a real estate agent you trust comes into play. They’ll suggest an offer, as well as any terms, and then guide you through the negotiation process.
What Kind of Mortgage Do You Need?
There are lots of options for mortgages. You can choose a 10, 15, 20, or 30-year mortgage. The shorter the term, the higher the payments, but ultimately you’ll pay less interest and own your home much sooner. If you are a first time home buyer, you may qualify for a government loan (FHA) that requires a lower down payment. Adjustable rate mortgages (ARMs) are another option, but a very risky one.
What’s the Difference Between Pre Approval and Approval, and How Long Does it Take?
When you first start home shopping, you’ll talk to some lenders and “prequalify” for a mortgage. This doesn’t mean much more than a bank has estimated that you might be approved for a certain amount. It’s a ballpark figure to use when you are house hunting. Pre Approval means that you’ve submitted all your financial paperwork and have been approved by a specific lender for a specific amount. However, if things change in your finances (for example, if you make a big purchase or lose your job), you can still be denied the loan. Final approval happens when the bank agrees to close the loan. It usually takes about thirty days to process a mortgage loan, but it can take longer.
What Other Costs Are Involved?
Closing costs can often run about 2-5% of the purchase price. You’ll pay for the inspections, the title search, the mortgage origination fee, taxes, and more. It is crucial to let your mortgage broker and real estate agent walk you through this process and help you understand everything you’re responsible for.
What Does the Escrow Period Entail?
Once you’ve negotiated with the seller, you’ll make a deposit, and then you’ll enter escrow. Escrow is the period of time where the house is off the market, and you are contracted to buy it, provided there are no issues. It’s usually about thirty days, but it can be longer. This is where you’ll secure your mortgage and insurance, set up all the inspections, have the home appraised, have a title search done, and set your closing date.
The more you know about the process ahead of time, the more confident you will be going through the experience. Educating yourself will help you to get the right home at a price you can afford. Finding a local agent you can trust isn’t easy, and that’s why we are so proud of the reputation we uphold and the community we serve. Contact us today to talk about your homeownership dreams and we can help you find a new home- let’s start today!