Whether you’re looking for your first home or your fourth, buying a new home is an exciting time. But there are many elements involved in the homebuying process, from locations and neighborhood amenities, to school ratings and budget constraints.
As you navigate through the journey of purchasing your next home, you may have questions. We have answers to some of the most common questions we get asked during the homebuying process.
Hopefully, they’ll give you insight into the process and ease any anxiety you may have.
1. WHAT’S THE FIRST STEP IN THE HOME BUYING PROCESS?
Before you begin touring homes or going to open houses, obtain a mortgage pre-approval. This document outlines how much you can afford and how much you’ll get pre-approved for when finalizing your mortgage. It allows you to search for homes within your budget and wish-list. The mortgage officer will run a thorough credit check, verify income, and review other financial documents to determine a max approval amount during the pre-approval process. You may also discuss what type of loan is best for you, down payment requirements, and overall timeline. Contact our preferred lender to get started!
2. HOW DO I KNOW WHICH MORTGAGE IS BEST FOR ME?
There are many types of mortgages, and the more you know about them, the better. Most people use a Fixed-Rate Mortgage. In a fixed rate mortgage, your interest rate stays the same for the term of the mortgage, which is normally 30 years. The advantage of a fixed-rate mortgage is that you always know exactly how much your mortgage payment will be, and you can plan for it. Another kind of mortgage is an Adjustable Rate Mortgage (ARM). With this kind of mortgage, your interest rate and monthly payments usually start lower than a fixed rate mortgage, but can change (either up or down), as often as once or twice a year. The adjustment is tied to a financial index, such as the U.S. Treasury Securities index. The advantage of an ARM is that you may be able to afford a more expensive home because your initial interest rate will be lower. There are several government mortgage programs, including the Veteran's Administration's programs and the Department of Agriculture's programs. What about FHA mortgages? FHA insures loans so that if buyers default for some reason, the lenders will get their money. This encourages lenders to give mortgages to people who might not otherwise qualify for a loan.
3. DO I NEED A MINIMUM CREDIT SCORE?
Yes, you must meet and maintain a healthy financial status to qualify for a home purchase. Although different loans vary when it comes to credit score requirements, most require a score of at least 620 or higher. In rare instances, a score as low as 580 may work. If you do not currently meet credit score requirements, your mortgage lender will often provide you with a path to improve your score and qualify for the loan you need over a period of time.
4. HOW MUCH WILL MY DOWN PAYMENT BE?
Down payments depend on the type of mortgage loan you use. However, in most cases, you can expect a down payment to range from 3% to 5% of the total cost of the home.
5. IN ADDITION TO A DOWN PAYMENT, WHAT ELSE SHOULD WE PLAN TO PAY FOR?
Planning a financial path during the homebuying process is essential. Although a down payment is typically the biggest out of pocket expense you’ll face, there are other fees you should be prepared for, including:
6. I ALREADY OWN A HOME. SHOULD I SELL IT BEFORE BUYING ANOTHER ONE?
There is no “correct” answer to this question. There are pro’s and con’s to either option:
The biggest benefit to buying a home before selling your current home is having a suitable property lined up. This can reduce the stress of having to find a home once your current home is sold. But if you are unable to purchase a new home without having to sell your current home, your purchase offer is going to be contingent upon sale and transfer of title of your current home. If your current home does not sell in a timely manner, this can lead to getting “bumped” by a non-contingent buyer and losing out on the home you’re looking to purchase.
The time it takes to sell your current home is unpredictable. There is no way to tell exactly how long it will take. Selling your current home before buying a new home will put you in an ideal position to negotiate on the new home you’re purchasing due to the fact you are purchasing without the sale contingency of your current home. One risk of selling your current home without buying a new one first is the possibility of not having a place to live. There are options if your current home sells before buying another, though, such as a “rent-back” negotiation with the buyer of your current home.
7. HOW IS THE NEIGHBORHOOD/AREA?
Prospective home buyers often have questions regarding certain neighborhoods/areas. There are rules about steering buyers into specific areas and neighborhoods. This doesn’t mean that your agent/Realtor cannot provide you with tips to help you choose the right neighborhood. Many buyers wonder about the growth of the local economy, crime statistics, taxes, and local amenities. Your agent/Realtor should be able to give you all of the pertinent information to allow you to make an educated decision on areas and neighborhoods.
8. HOW ARE THE SCHOOLS?
While this is another question that agents/Realtors tend to tread very lightly with, there is no doubt that schools impact property values. A good agent/Realtor should be able to provide you with names or websites where you can find information on the local schools so that you can determine whether or not the schools are acceptable to you or not.
All financing, credit score, lending, and down payment information are examples only. HistoryMaker Homes is not a lender and none of the information contained herein constitutes lending advice. Consult an accredited lender for guidance.
I’m a first time home buyer and this was a easy process.