7 Critical Questions: What You Need to Know Before Buying Your First House
Becoming a first-time homebuyer is a significant life milestone, but it can also be overwhelming. Between financing and signing on the dotted line, there are a lot of steps and a lot of decision making. To help you navigate this journey, we’ve compiled some frequently asked questions (FAQs) that many first-time buyers have, along with expert answers to guide you on the path to homeownership.
1. How much can I afford?
Determining your budget is a crucial first step. A common rule of thumb suggests spending up to 28% of your gross monthly income on housing and up to 36% on your total monthly debts. It’s important to know that just because you can get extra financing doesn’t mean you can comfortably take on extra debt!
2. What is a down payment?
A down payment is a lump sum you pay upfront, when purchasing a home; the average down payment is about 20% of the home’s price. However, there are many first-time homebuyer programs that offer special options as low as 3-5% for down payments. A larger down payment means lower monthly payments and better loan terms.
3. What do pre-qualification and pre-approval mean?
Pre-qualification is an initial estimate of how much you might be able to borrow, based on self-reported financial information. Pre-approval is a more in-depth process where a lender digs into your financial history to determine how much money they will loan you.
4. Should I use a real estate agent?
Yes! Real estate agents are a huge help. They can help you find best-fit properties, negotiate on your behalf, and provide guidance every step of the way. Plus, an agent’s fees are typically paid by the seller, not the buyer.
5. What extra costs should I budget for when buying a home?
Beyond the down payment, you’ll need to plan for closing costs which can include lender fees, inspection costs, and property taxes. It’s also wise to set aside funds for moving expenses, home maintenance, and initial home improvements.
6. What type of mortgage should I choose?
Fixed-rate mortgages offer stable, predictable payments, while adjustable-rate mortgages come with lower initial rates but can fluctuate over time. Your choice between the two will depend on your financial goals and risk tolerance.
7. How long does the home-buying process take?
The timeline for buying a home varies, but it generally takes 30-45 days from the time your offer is accepted to closing. Inspections, negotiations, and financing issues can delay this process.
These basic details should offer a solid foundation for starting your first-time homebuyer journey. Remember that every experience is unique, so the best advice we can offer is to get excellent professional guidance from real estate agents and lenders. They can provide personalized advice and support as you make this significant investment. Happy house hunting!