There are many frequently asked questions — FAQs — for first-time home buyers to consider. Buying a first home can be joyful, but also stressful, confusing, worrisome, and sometimes downright scary.
We’ve helped a lot of people through this process, and we’re here to help you, too.
Here are 10 of the most common FAQs for first-time home buyers …
What can I afford? The general rule is that no more than 28% of your monthly income should go to a mortgage payment. For example, if your household monthly income is $5,000, then your mortgage payment should be no higher than $1,400. Some lenders will approve you for a mortgage with a payment that is a higher percentage of your income. There are multiple factors that a lender will look at, including your credit score and existing debt.
Should I get prequalified? Getting prequalified with a mortgage lender helps you know ahead of time an estimate of how much house you can afford. And for that reason, it’s a good idea. It saves time, effort, and even heartbreak in some cases. For example, if you know you are prequalified for a purchase price of up to $250,000, then you won’t waste your time looking at homes in the $350,000-$400,000 or higher ranges. And if you don’t look at them, you won’t fall in love with one and then be disappointed that you can’t afford it.
Do I need to be preapproved? Maybe. A preapproval is stronger than a simple prequalification estimate. For a preapproval, the mortgage lender actually verifies all of your financial information and credit history. As such, having a preapproval may carry extra weight if your offer on the home is competing against other offers. It’s best to ask your realtor how competitive the market currently is and if a preapproval would be beneficial.
How much money do I need for a down payment? It depends on your credit score and the type of mortgage loan you’re getting. Your mortgage lender will be able to assist with helping you decide which type of mortgage is best for you and your situation as well as help you calculate the down payment you would need. There are some mortgage programs that require no down payment at all. Others require 3% or 3.5%. There also are down payment assistance programs in California that are worth looking into.
What are closing costs? Closing costs are the fees you pay in addition to the purchase price at the close of your escrow. These can include title insurance fees, notary fees, appraisal and home inspection fees, processing fees, transfer and recording fees, underwriting fees, etc. Closing costs typically average between 2% and 5% of the home’s purchase price.
What’s included in the home? This is a great question that you must confirm with your real estate agent and make sure it’s specified in the contract. Generally, built-in appliances like stoves and dishwashers stay. Movable appliances like the refrigerator and washer/dryer may be negotiable. You also should specify whether window treatments (shades, drapes, shutters, etc.) are included or not. They generally are, but you don’t want to be surprised when you take possession and move in.
How do I know if it’s a good price? Ask your real estate agent for comps (comparable sales) to see what homes similar to the one you’re looking to buy have sold for recently. You’ll want to compare homes that are similar in terms of location, size, condition, and features. Real estate agents compare properties all the time. Use their expertise to give you peace of mind regarding the price.
How do I know what the property taxes will be? Your property tax is calculated by multiplying the property tax rate for the home’s location by its assessed value. This is another thing your real estate agent can help you with.
How do I know if there’s anything wrong with the house? A home inspector can give you an impartial report of the condition of the house and its systems (plumbing, electrical, HVAC, etc.). You may also want to obtain a roof inspection. You can ask the sellers if any upgrades or renovations were done by them or by a licensed contractor, and if there were permits pulled for them (if so, they would have been officially inspected at completion). You can also talk to the neighbors … sometimes they know additional details.
Who handles all the paperwork? Your real estate agent will prepare all the paperwork — the contract — for the purchase of the home. Other paperwork for the transfer of ownership is generated by the title company. Rest assured that all of it will be handled by professionals on your behalf.
If you have additional questions, we’re here to help! The real estate experts at Foxen Realty have helped countless first-time home buyers, and we’re ready to help you, too.
Send us a message or call us at 559-490-0207 today to learn more about how we can help and to get started.