FAQ

FIRST TIME HOME BUYER – FAQs



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 largest purchases you’ll ever make. Of course, you don’t want to make a mistake, so all of the questions you may be asking and concerns you may be feeling are more than natural.

To help guide first-time home buyers through their big-time purchase, we’ve compiled a list of some of the most-frequently asked questions we’ve received. Here are a few of those questions, along with some answers to help ease your mind during the home-buying process:

How do I know if I’m ready to own a home?


While there is no single sign that will confirm a person is ready for home ownership, there are a couple cues that will signal it could be your time. If you love the area that you’re living in and you’re planning to stay for a while, you may be ready to settle down and buy a home. If you’ve got a savings plan in order that is allowing you to pay down debt and save a little nest egg, you could be ready for the financial side of home ownership. Finally, if you’ve checked your credit and have cleaned up any issues and paid down most of your bills, you should be ready to be a homeowner.

Why should I buy a home instead of renting one?


The real estate market is constantly changing, but often times, 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 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.

Am I able to buy a home with
average credit and little or no money down?


Yes, but it depends on the lender. This question is one reason that it is always a good idea to shop around for a mortgage. In most cases, there are loan programs for nearly every homebuyer who is looking to get into the real estate market. A buyer’s credit score and down payment may impact the amount they’re approved to buy or their financing rate, but there are typically mortgage options to meet many financial situations.  Ask about first-time home buyer programs.

What is PMI?


PMI or private mortgage insurance is TAX DEDUCTIBLE, along with the interest portion of the mortgage payment and the property taxes. PMI is insurance that lenders use to protect themselves against a buyer who defaults on their home loan. PMI is money a buyer pays along with their principal and interest to reimburse a lender in case they default. This fee is usually lumped into a buyer’s monthly mortgage payment until your loan is at 78% of the value of the property, at which point PMI is typically cancelled (except with FHA loans).

What does a monthly mortgage payment cover?


When a first-time homebuyer is looking to purchase a home, it is important to realize that a monthly mortgage payment does not cover all of the monthly expenses that go along with home ownership. Often times, a monthly mortgage payment covers the principal amount borrowed, homeowners insurance, property taxes, interest fees and PMI, if applicable. Monthly mortgage payments do not cover things like utilities, cable and internet service or homeowners association fees.

Do I need a real estate agent?


Technically, it is possible to buy a home without a licensed real estate agent. It’s just a whole lot harder to do on your own. Not only have professional real estate agents received training to help buyers, but they’re also up-to-date on current market conditions, real estate procedures and the closing process. They’ve also got helpful industry contacts, like lenders, appraisers and other service professionals at their disposal that can make the buying-process go more smoothly. Finally, a professional real estate agent is happy to represent a buyer while making an initial offer, negotiating on price and the repairs any other time during the home-buying process.

What happens during escrow?


After buyers and sellers agree on a home’s price and have a purchase contract signed by both parties (along with any counter-offers), the escrow process begins and it typically lasts between 30-60 days. During the first 17 days, home inspections and appraisals are completed and the lender will give you loan approval (hopefully, you were credit approved upfront). A couple of days before the scheduled close of escrow you will sign the loan and escrow paperwork. The day before closing the lender with “fund” the loan (wiring their loan amount to the escrow) On the day the escrow closes, escrow releases the legal documents and disburses the funds. You’ll get the keys to your new house after the recording of the deed is confirmed.


Any questions left un-answered?