7 Top First-Time Home Buyer Questions and Answers
The prospect of buying your first property is both exhilarating and scary, like riding a rollercoaster in the dark! This big step brings important questions, and the answers become stepping stones to the keys to your new house.
Working with a reputable loan agent, and knowledgeable realtor, helps to make the home buying process successful. These two professionals will answer all your questions and offer support before, during, and after your home buying adventure.
The Top 7 First-Time Home Buyer Questions and Answers:
1- How much do I qualify for?
Your loan agent will pre-qualify you for the amount of home you can afford. The interest rate on your mortgage loan will vary according to your credit history and credit score. The qualifying process also includes more than just the purchase price of the home, but will take into account property taxes, homeowner’s insurance, and mortgage insurance, if applicable. If you are looking for a property that has an HOA (Home Owner’s Association) you’ll need to let your loan agent know.
2- Where do I find a good loan agent?
It’s wise to check out at least two options for mortgage loan quotes. A good starting place is where you already bank, or a credit union you may belong to. It’s good to talk with someone live, rather than just submitting your documents online, so you can ask questions as you go. They will walk you through the loan process and give you a checklist of information needed to get you pre-approved.
It’s also a good idea to check with a mortgage loan broker, as they match borrowers with lenders, and often offer lower rates than banks do. Bottom line is you should shop around and negotiate the rates you’re given, until you find the loan that best meets your needs.
Ask friends and family for referrals, as most homeowners are quick to tell you about their tried and true loan agents. It’s good to have your pre-approval before you start looking for your new home, so when you meet your realtor, you’ll have your approved price range dialed in.
3- How long does the process take to buy a house?
Typically, buyers are searching for homes on real estate websites for about 18 months prior to contacting a real estate agent. This homework is valuable for buyers to watch price fluctuations, dial in neighborhoods, compare amenities, consider school ratings, and check commute times.
After buyers connect with their preferred realtor, the house hunt begins. As soon as a property is selected, the realtor prepares an offer and submits it to the seller along with the pre-approval letter, earnest money deposit, and verification of funds, in the form of bank statements.
Sellers usually respond to the offer within 3 days, and if accepted, escrow is opened the following business day, upon receipt of your deposit funds and a copy of the fully executed purchase contract. From here, it usually takes between 30 to 45 days to close escrow.
Next, buyers schedule a home inspection (their realtor can assist with references) usually within a week of the offer acceptance. The loan company sends out the appraiser to determine the property’s market value. All other inspections are done about this time, if they were asked for in the purchase contract, such as wood destroying pests, septic tank, roof, etc.).
If the inspections reveal items that need repair, the buyer’s agent will write up a Request for Repairs list and submit it to the seller’s agent. It’s up to the seller to decide to accept or decline the requests. If the seller agrees to make the repairs, they will be completed before escrow closes.
Occasionally, the seller may agree to a concession to cover costs for some of the requested repairs, and the buyer can take care of them after the sale is closed. That amount is credited to the buyer through escrow.
Buyer signs the seller’s disclosures, which state the rights of all parties involved in the transaction as well as the material facts known about the property by the seller.
Within 21 days of offer acceptance, the buyer removes contingencies. That means, the buyer has received full loan approval, and all the inspections have been completed and remedies agreed upon by seller and buyer.
The loan moves along through underwriting, and may require an extra hoop to jump through along the way, with additional documents or verification of some kind. Again, the loan agent or processor will guide the buyer as needed.
Escrow will supply an estimated closing cost statement to the buyer that shows the actual costs for both buyer and seller. The buyer usually wires the closing costs to escrow a day or two before closing.
Loan documents are prepared and sent with a notary for buyer’s signatures. The buyer receives a 3-Day Right of Rescission, to give time for the buyer to be sure of the loan they are agreeing to.
Finally, all the paperwork is reconciled with the mortgage and escrow companies, the loan is funded, and the property is recorded with the county. Now the buyer receives the keys to the new house!
4- What will my house payment cover?
If elected, the buyer may choose to include property taxes and any special assessments/Mello roos, and home owners insurance in the monthly mortgage payment. If the property is located in an association, the Home Owners Association fee is paid directly to the property management company for that specific HOA.
5- What will my costs be?
The good news for buyers is commission is traditionally paid for by the seller to their listing agent, who typically splits the commission with the buyer’s agent. Buyers pay for the home inspection fee, the appraisal, and the buyer’s portion of escrow closing costs. This is in addition to the earnest money deposit and down payment for the property.
6- Should I look for a fixer or a turn key property?
Most first-time buyers look for a turnkey property because they don’t have the extra money to make needed improvements. The benefit to buying a turnkey property is the upgrades and repairs are built into the purchase price, which means you pay for them with your loan.
New construction properties offer a more carefree introduction to home ownership. The day you get the keys to your new home, you get to move in and start living the dream. Usually, landscape installation is the only item on your to do list. It’s a good idea to check with your new neighbors for landscaping company referrals. If you buy in an association, be sure to submit plans to your HOA for approval, before you begin the landscaping project.
Do you have family and friends who are willing and able to tackle renovation projects should you choose to buy a fixer property? If you have time, support, energy, and money, then it makes sense to buy the worst house on the block, and renovate it as your dream house.
If you are interested in buying in a well-established neighborhood, you’ll pay a premium for properties already updated. If the property has deferred maintenance, you might consider obtaining a construction loan to cover the cost of the repairs and upgrades, unless you have lots of extra cash available to use.
Either way, be careful not to overbuild for the neighborhood, and keep your improvements in line with comparable properties.
7- Where do I find the best realtor?
Referrals from family and friends is the best route for finding a preferred realtor. Often, small boutique real estate companies offer the best customer service. The realtors treat you like family and offer extra support through the process of buying your first home. They also have reputable referrals for additional services buyers may need. Your realtor is ready to help you find your perfect property and accomplish the biggest financial decision of your life!
Happy House Hunting!
Cindy Vandael is a Broker at Vandael Properties, in Orange County, California.