Buyer FAQ

The first step in buying a home is to assess your financial situation and get pre-approved for a mortgage. This helps determine how much you can afford, and it’s essential to know your budget before starting your home search. A pre-approval letter from a lender strengthens your position when making offers, as it shows sellers you're a serious buyer. 

The down payment for a home typically ranges from 3% to 20% of the purchase price. FHA loans may require as little as 3.5%, while conventional loans generally expect a down payment of around 20% to avoid private mortgage insurance (PMI). The more you can put down upfront,  the less you’ll need to borrow, potentially lowering your monthly payments. 

Pre-qualification is a basic estimate of how much you can borrow based on your self-reported financial information. Pre-approval is a more formal process where the lender reviews your financial documents (like your credit report, income, and assets) and provides you with a specific loan amount you are eligible for. Pre-approval gives you a stronger position when making offers,  as it demonstrates that a lender is willing to lend you money. 

Closing costs are fees and expenses you pay at the closing of the real estate transaction. These include costs for loan origination, home inspections, title insurance, attorney fees, and appraisal costs. Generally, closing costs range from 2% to 5% of the home’s purchase price. It’s important to budget for this expense in addition to your down payment. 

The home-buying process typically takes between 30 to 60 days. This time frame includes making an offer, negotiating the purchase price, securing financing, conducting home inspections, and closing the deal. The exact timeline can vary based on the seller’s situation,  market conditions, and any issues discovered during inspections. 

A home inspection is a professional evaluation of a property’s condition. The inspector examines the home's structure, systems (electrical, plumbing, HVAC), and major appliances. This helps identify potential issues, such as leaks, mold, or structural problems, that may not be immediately visible. A home inspection is crucial to ensure you’re not purchasing a home with hidden, costly repairs. 

Earnest money is a deposit made to show the seller you’re serious about purchasing their home.  Typically, earnest money is between 1% and 3% of the home’s purchase price and is held in an escrow account. If the deal goes through, it is credited toward your down payment or closing costs. If you back out of the deal for reasons not covered in the contract, the seller may keep the earnest money. 

A contingent offer means the home purchase is dependent on certain conditions being met before the sale can proceed. Common contingencies include a financing contingency (ensuring you secure a mortgage), a home inspection contingency (where you can back out if issues arise during the inspection), and an appraisal contingency (where the home must appraise for at least the offer price). 

Yes, you can negotiate the price of a home, especially in a buyer’s market or when there are issues with the home that need to be addressed. The final price is often a point of negotiation between the buyer and seller. Your real estate agent can help guide this process by advising on a reasonable offer based on comparable sales (comps) in the area and the condition of the property.

Private Mortgage Insurance (PMI) is insurance required by lenders if your down payment is less than 20%. PMI protects the lender in case you default on your loan. If your down payment is smaller, PMI is typically added to your monthly mortgage payment. Once you build 20% equity in the home, you may be able to cancel PMI. 

When touring a home, pay close attention to the layout, overall condition, and any signs of potential issues. Look for things like water stains, cracks in the walls or foundation, outdated plumbing, or electrical problems. Assess the neighborhood, local amenities, and school districts,  as these will impact your long-term satisfaction and the home’s resale value. 

There are several types of home loans, including: 
• Conventional loans: These are not insured by the government and typically require a higher credit score and down payment. 
• FHA loans: Backed by the Federal Housing Administration, these loans require lower down payments and are more lenient on credit scores. 
• VA loans: Offered to veterans and active-duty military members, VA loans often require no down payment or private mortgage insurance. 
• USDA loans: Available for rural homebuyers, USDA loans often offer low interest rates and require no down payment. 

An escrow account is a third-party account used by the lender to hold funds for property-related expenses like taxes and insurance. The lender collects a portion of these costs with each mortgage payment and disburses them on your behalf when they are due. This ensures that your property taxes and insurance premiums are paid on time. 

A fixed-rate mortgage has a consistent interest rate for the entire loan term, which means your monthly payments will stay the same. An adjustable-rate mortgage (ARM) has an interest rate that can change after an initial fixed period (e.g., 5 or 7 years). ARMs typically offer lower initial  rates, but the rate may increase after the fixed period, causing monthly payments to fluctuate. 

Property taxes are typically included in your monthly mortgage payment through an escrow account. The lender collects a portion of the taxes each month and pays them on your behalf when they are due. Make sure to account for property taxes in your budget, as they can vary by location and can significantly impact your overall monthly costs. 

Homeowners insurance protects you financially in case of damage to your home or belongings due to events like fire, theft, or vandalism. Most lenders require proof of homeowners insurance before finalizing the loan. Insurance can also cover liability if someone is injured on your property. The cost of insurance varies based on factors like location, home value, and coverage limits. 

A buyer’s agent represents the buyer’s interests and assists with finding homes, making offers,  negotiating, and guiding you through the buying process. A seller’s agent (also called a listing agent) represents the seller and is responsible for marketing the home, negotiating offers, and facilitating the sale. It’s important to have your own agent to ensure your interests are fully represented. 

Yes, you can sell your home and buy a new one at the same time, but it requires careful planning. Here’s how to make it work: 
1. Get Pre-Approved for a Mortgage: Secure financing for your next home before listing your current one.
2. Understand Market Conditions: Timing matters—if it's a seller's market, your home may sell quickly, but finding a new one could take longer. 
3. Contingent Offers: You can make an offer on a new home that’s contingent on selling your current one, though sellers may hesitate. 
4. Use a Bridge Loan or HELOC: These financial tools can help cover the gap between selling and buying. 
5. Negotiate Closing Dates: Work with your agent to coordinate closing dates or request a rent-back agreement to avoid moving twice. 
6. Consider Temporary Housing: If there’s a gap, look into short-term rentals or staying with family. 
Working with a skilled real estate agent is key to navigating this process smoothly. 

Long-term costs of homeownership include your mortgage payments, property taxes,  homeowners insurance, maintenance, utilities, and possibly homeowners association (HOA)  fees. You’ll also need to budget for occasional repairs, upgrades, and routine upkeep (e.g., lawn  care, roof maintenance). It’s important to prepare for these ongoing expenses to avoid financial  strain in the future. 

You can save money on your mortgage interest rate by improving your credit score, making a larger down payment, shopping around for the best rates, or choosing a shorter loan term. A  larger down payment reduces the loan amount and may help you qualify for a lower rate.  Additionally, comparing multiple lenders and loan offers can help you find the most favorable terms.