1st Time Home Buying FAQ
Why should I buy instead of rent?
A home is an investment. When you rent, you write your monthly check and that money is gone forever. But when you own your home, you can deduct the cost of your mortgage loan interest from your federal income taxes, and usually from your state taxes. You can also deduct the property taxes you pay as a homeowner. In addition, the value of your home may go up over the years. Finally, you'll enjoy having something that's all yours - a home where your own personal style will tell the world who you are.
Can I become a homebuyer with bad credit and very little for a down payment?
There are programs available for first time home buyers with poor credit and limited savings for a down payment.
Are there special home ownership grants or programs for single parents?
There is help available. Start by becoming familiar with the home buying process and pick a good real estate broker. Although as a single parent, you won't have the benefit of two incomes on which to qualify for a loan, consider getting pre-qualified, so that when you find a house you like in your price range you won't have the delay of trying to get qualified.
Should I use a real estate broker? How do I find one?
Using a real estate broker is a very good idea. All the details involved in home buying, particularly the financial ones, can be mind-boggling. A good real estate professional can guide you through the entire process and make the experience much easier. A real estate broker will be well acquainted with all the important things you will want to know about neighborhoods being considering, the quality of schools, the number of children in the area, traffic volumes, and more.
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 cost of the house and the type of mortgage you get. In general, you need to come up with enough money to cover three costs:
- Earnest money - the deposit you make on the home when you submit your offer, to prove to the seller that you are serious about wanting to buy the house.
- Down payment - a percentage of the cost of the home that you must pay when you go to settlement.
- Closing costs - the costs associated with processing the paperwork to buy a house.
When you make an offer on a home, your real estate broker will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The amount of your earnest money usually varies. Ask your realtor for more information.
How do I know if I can get a loan?
Start by using our mortgage calculators to see how much mortgage payment you could potentially handle. If the amount you can afford is significantly less than the cost of homes that interest you, then you might have to wait awhile longer. Another good idea is to get pre-qualified for a loan. That means you go to a lender and apply for a mortgage before you actually start looking for a home. Then you'll know exactly how much you can afford to spend, and it will speed the process once you do find the home you want.
In addition to the mortgage payment, what other costs do I need to consider?
You will, of course, have your monthly utilities. If your utilities have been covered in your rent, this may be new for you. In addition, you might have homeowner association or condo association dues. You'll definitely have property taxes, and you also may have city or county taxes. Taxes are normally rolled into your mortgage payment.
So what will my mortgage cover?
Most loans have 4 parts:
- Principal: the repayment of the amount you actually borrowed.
- Interest: payment to the lender for the money you've borrowed.
- Homeowners Insurance: a monthly amount to insure the property against loss from fire, smoke, theft, and other hazards.
- Property Taxes: the city/county taxes assessed on your property.
Is there any reason to consider a Realtor even if searching the internet for a home is easy?
A lot of agents bring value to the whole process of searching. They can analyze all the data, answer any question, share their professional knowledge, handle all the paperwork and do all the errands needed in any real estate transaction.
Is saving for the final dream home better than starting with a cheaper starter home?
Saving for the unique dream home may take a long time. On the other hand, a lot of ideal mortgage interest rates have been swarming the market. Having a low rate makes the home more affordable and moves most buyers to decide to get a home.
Price appreciation has also been strong, creating solid gains in communities across the country.Buying a starting home today can potentially build equity that can help purchase a bigger, more ideal home in the future.
How much can I afford?
When buying a home, a common rule to follow is that multiplying your annual salary by two and a half times gives you how much home you can afford. We suggest using an online calculator that can help in figuring out how much can be borrowed or by Contacting one of our Mortgage Professionals.
What is the first thing to do when buying a home?
Being psychologically ready and financially ready are the first things to do when buying a home. Make sure to ask these questions first:
- Is my income stable enough?
- Do I owe less than what I make?
- Can I afford to pay the down payment and closing costs?
- Am I on the right track to improve the bad credit that I already have?
Homes need regular care and attention. Make sure to also be prepared for any extra costs like repairs and upkeep. When the truthful answer “yes” comes to mind, then being a couple of steps ahead will be a breeze to owning a home.
What is it that my agent shouldn’t know?
You shouldn’t share the most money you can pay for a home. Telling a Realtor your top dollar will give a lesser chance of trying to negotiate the least price available. While the real estate agent spends time showing the home and sharing information, the agent will still be working for the seller who pays each and every agent that participates in getting the purchasing transaction finished. Commission and percentage of homes are the Seller’s way of paying the agent. One way of circumventing this is by hiring a Buyer’s agent or a Buyer’s broker.
What does a buyer’s agent do?
The buyer’s agent’s job is to solely represent the buyer. The agent works to look after the Buyer’s interests in the transaction and handles negotiations with the Seller's agent.
How do you know how much a home is worth?
The quick answer is a home is worth whatever amount is paid for it. Other factors only provide additional estimates of its value. Fair market value is only achieved when both buyer and seller agree on a proposed price. For example, in a seller’s market when the supply of homes for sale is low but the demand for housing is high, homes can typically sell for much more than the asking price as bidding between buyers ensue.
Are there standard ways to find out how much a property is worth?
The two most common ways are through a comparative market analysis and an appraisal. By reviewing similar homes that have sold near the neighborhood along with current listed homes for sale, a Realtor can give a comparative market analysis which informally estimates the value of a home based on the sales prices of those properties.
What’s the difference between sales price and list price?
The list price is the asking price that a Seller estimates their home's are worth. Sellers can either use higher or lower amounts than similarly sized homes in the neighborhood. Comparing homes recently sold in the area is a good way to determine if the asking price is fair or too low, or too high. The sales price is the amount the home actually sells for.
What’s the difference between market value and appraised value?
Market value is the price that a buyer and seller will agree on after ascertaining a “meeting of minds.” This could vary depending on any given point in time. Appraised value is the estimation determined by a trained and certified appraiser through the comparison of recent sales of similar homes, the condition of the property plus several more factors.
Is it alright to use a Realtor to buy a newly constructed home?
Yes, in fact, a couple of builders use agents to search for potential buyers. Using a buyer’s agent can assist in negotiating the cost and the improvements of new home. Agents are especially valuable when directing the progress of a newly constructed homes that match the needs and necessities. Realtors also search for trustworthy builders who are financially sound and who respond quickly to the buyer’s concerns.
Builders typically require the agent to be at the site for the buyer’s first visit to a model home. This is a reasonable procedure that allows the agent to get paid should the buyer decides to purchase. On the other hand, if the buyer finds a new home, visits it and purchases without an agent, the builder has the right to refuse the commission pay even if the agent unexpectedly became involved in the process.
What is the best method when searching for a Realtor?
To start off, Contact any acquaintances or any associates. Family, friends, co-workers or even neighbors who bought a home recently will be able to give tips and advice on their agent. From time to time, Realtors that are Contacted can refer the buyer to a different agent who is more familiar with the buyers and sellers in the community. When three names are referred, have a meeting with each agent and consult them. Ask their knowledge of the neighborhood, their professional experience and commitment. Remember also that some agents do not work full time for other work either during nights or on the weekends.
What can be expected of a professional Realtor?
Capability, efficiency and good moral values can be expected of licensed Realtors. In accordance to the All America’s Real Estate book, competent agents give the extra time and effort to qualify the buyers and show them a home within their price range. They strategically plan the route and they pre-inspect the properties. Also, the agents have detailed knowledge on any financing options, the latest updated on home trends, and they share potential buyer’s information on any local housing market or house transaction. Reputable agents strictly follow the code of ethics where they avoid any high pressured tactics, any home that does not fit the needs and they also inform any problems regarding the property. Realtors should always show respect to other agents and real estate firms, and never speak bad of them.
Are home buyers guarded against any home buying/renting discrimination?
According to the Law, Realtors cannot discriminate based on race, color, religion, gender, disability, family status or national origin. They are also not allowed to imply any directives from the seller to discriminate. If there is any suspicion of discrimination, a complaint can be filed the nearest Local Department of Housing and Urban Development (HUD) office. Complaints can also be filed by calling the HUD’s toll-free number, 1-800-669-9777 or can be filed by visiting www.hud.gov/complaints/housediscrim.cfm.
What are the benefits of possessing a home?
There are a lot of advantages to owning a home. The most alluring advantage is that you own the home which gives you total control of the living space as compared to having a landlord with rules to follow. Other benefits result from tax savings and capital accumulation as the property appreciates in price over time. Equity can also be used to help children go to college, to buy a second home, or to make home enhancements. Any mortgage interest that was paid on a California home loan is tax deductible, as is the local property tax. If the fixed-rate home mortgage loan is available, this will help you calculate the mortgage monthly payment and can give you a chance to invest more on other things.
How do I know if I should add space to my home or just buy a new house?
A couple of things to consider when buying in a home are the costs, the needs of each person, and what
features can add value in the future. Another important thing to consider here is the emotional attachment to the current