First Time Buying Home?4/29/2015
So you're a first-time homebuyer and have decided that it's time to invest in your future and stop paying rent! Congratulations! Searching for a home can be a very exciting time! However, for some first-time buyers, this can also be a bit scary and overwhelming. The number one mistake I see that first-time home buyers make is spending endless hours searching through hundreds of websites for the perfect home, but having no idea whether they qualify for a mortgage, and if they do, than how much they qualify for.
Another common mistake is not knowing what to expect during the home buying process. This is why a Realtor is so important to use when buying a home. An experienced Realtor will walk you through the entire process before you get started. They can also put you in touch with a lender if you don't already have one, discuss with you what costs to expect once an offer has been accepted, as well as handle contract negotiations, inspections, closing attorneys, and most importantly, handle any "issues" that may come up before closing. Our job is to take the stress off of you and make this experience an enjoyable one. Through my experience as a Realtor, I have heard just about every question there is from first-time homebuyers. I have comprised a list of the most common questions I get asked. Are these questions you've asked yourself?
Why should I buy, instead of rent?
Buying a home is an INVESTMENT in your future. When you rent, you are writing a monthly check and kissing that money goodbye forever. Now, it's important to note, that renting is the best option for some people. How long do you plan on remaining in your home? 2-3 years? If you don't plan on living in your home for at least 5 years, you may not gain enough equity in your home for it to be worth it in the long run. However if you do plan on being in your home for a while, owning your own home not only will build you equity, but you can also deduct the cost of your mortgage loan interest from your federal income taxes, and usually from your state taxes. This will save you a TON each year, because the interest you pay will make up most of your monthly payment for most of the years of your mortgage! You can also deduct the property taxes you pay as a homeowner. Let's not forget the value of your home may go up over the years.
Can I buy a home even if I have bad credit, and don't have much money saved for a down-payment?
There are many programs out there that can help those with bad credit and no money down. You may be a good candidate for one of the federal mortgage programs out there. Start by contacting a local lender, or even a HUD-funded housing counseling agency. Both of which can help you sort through your options. But there ARE options! For example, if you qualify for a USDA loan, you aren't required to put any money down…that's right! USDA loans are 100% finanancing loans that require no down payment. Better yet, USDA eligible property lines have been expanded in recent months, which means more homes are eligible! That's just one of the MANY options out there so check with a Realtor or lender to see what is available to you. If you are not sure who to contact, call or email me and I will set you up with a lender that is right for you.
How much money will I have to come up with to buy a home?
The answer to this question depends on a number of factors, including the purchase price of the home and the type of mortgage you get. Here are a few things that you need to know up front:
Earnest Money -Earnest money is the money you need to come up with at the time of the offer. It is a deposit that you make on the home that shows the seller that you are serious and want to buy their home. If your offer is accepted, this money is held in your real estate broker's escrow account until closing. At time of closing, this money is applied to your closing costs that you may owe. If you do not owe any closing costs, then you get that money back. If your offer is not accepted, your money will be returned to you. There are ways you could lose your earnest money, so check with your Realtor on how you could lose this money before making an offer. So how much earnest money is put up? Generally your deposit will range from $500-$2,000, depending on the purchase price of the home. Talk with your Realtor and decide on an amount that you are comfortable with. ??
Down Payment - The down payment is a percentage of the cost of the home that is paid at closing. The more money you put into your down payment, the lower your mortgage payments will be. Some types of loans require 10-20% of the purchase price. That's why many first-time homebuyers turn to FHA or USDA loans. FHA loans require very little down, and USDA loans require no money down. ??
Closing Costs - Closing costs are also paid at the closing table. They average 3-4% of the purchase price of your home. These costs cover various fees your lender charges and other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs so you won't be caught by surprise. When I work with buyers, I always negotiate closing costs with the seller. In some cases, most if not all of your closing costs can be paid by the seller. It's important to note that when buying a foreclosure, you may pay most of your closing costs if not all.
How do I know if I can even get a loan?
Some people like to use mortgage calculators to see how much they could pay a month. This helps you see if the amount you can afford is significantly less than the cost of homes that interest you. If that's the case, you might want to wait awhile longer. But the BEST way is to contact a Realtor who can put you in touch with a lender that will know what kinds of programs would work best for you. I cannot stress enough how EXTREMELY important it is to get pre-qualified for a loan before you start searching for your dream home! Then you will know EXACTLY what you can afford to spend. Not only that, but most sellers require a pre-qualification letter at the time of the offer. They want to know you have done your homework and know you can afford the home before they get locked into a contract and take home off the market.
What do I need to take with me when I apply for a mortgage?
You should have social security numbers for both you and your spouse if you are both applying for a loan; copies of your checking and savings account statements for the past 6 months; evidence of any other assets like bonds or stocks; a recent paycheck stub detailing your earnings; a list of all credit card accounts and the approximate monthly amounts owed on each; a list of account numbers and balances due on outstanding loans, such as car loans; and copies of your last 2 years' income tax statements. You may be asked for additional info depending on your lender.
Do I have to pay a Realtor when buying a home?
ABSOLUTELY NOT! Realtors' commissions are paid by the SELLER at time of closing and are factored into the listing price with a listing agent at the time the home is put on the market. So not only do you get to take advantage of the knowledge and expertise of a Realtor, but it costs you NOTHING!
Still have questions? Contact me and I will be HAPPY to answer any questions you may have. No question is a dumb question when making one of the biggest investments of your life! I'm available by phone at (601) 408-5123 or by email at firstname.lastname@example.org. I'm here to make your home buying experience a PLEASANT one!