9 Common Questions From First-Time Buyers, Answered
So you’re contemplating buying your first home and you’ve got questions — as you should! Albeit exciting, many first-time homebuyers find the process to be a bit confusing and overwhelming. After all, it’s not like you’ve done this before!
When it comes to questions about buying a home, especially in the Carolinas, allow us to be your go-to resource. Below, you’ll find our expert answers to some of the most common questions from first-time homebuyers. We hope you’ll leave with all of the answers you need to move forward with your decision.
1. Am I Ready To Buy Instead of Rent?
Before moving forward with a home purchase, ask yourself if you’re ready for the transition from renter to homeowner. Sure, landlords can be frustrating to deal with — but they are the ones responsible for all home-related maintenance and repairs. When you own a home, that responsibility now falls solely on you!
Besides maintenance and repairs, there are other pros and cons worth considering. When comparing similar properties, monthly rent is generally more expensive than a monthly mortgage payment. Plus, owning a home allows you to build equity and receive tax benefits. On the other hand, your rent may cover additional payments — such as water and utilities — while your mortgage won’t. It is important to factor in these payments when deciding between renting and owning.
2. Do I Know For Sure Where I Want To Live?
This question comes back to debating whether to rent or buy. While renting, you have the option to choose short-term leases and move around if you want to. Meanwhile, homebuyers spend an average of 10 years in their home before selling. So if you’re unsure where exactly you’d like to live long-term, we suggest waiting to look for homes.
At the end of the day, you’re not just committing to the home. Owning also commits you to the community, your neighbors, schools, restaurants, and so on. Make sure you love where you’re living just as much as you love the home itself!
Want to learn more about neighborhoods in the Carolinas? Our local community guides have been thoughtfully curated to help you find the neighborhood that’s right for you.
3. Do I Have a Strong Enough Credit Score?
Credit scores are determined by multiple factors, such as the length of your credit history, credit utilization, late payments, new credit lines, and amounts owed. A loan officer will examine these criteria to determine your eligibility for a mortgage loan. For example, a buyer with multiple late payments and high credit utilization will look risky to a lender, potentially causing them to deny the loan application.
The loan type you choose also determines the minimum acceptable credit score. An FHA loan typically requires a borrower to have a credit score of 580 and above, while a conventional loan would look for a score of 640 or higher. If you think your credit may prevent you from qualifying for the loan of your choice, be sure to do your research beforehand. The higher your credit score, the less you’ll have to pay as a borrower. See where your credit score can be improved and work towards it!
4. How Much Do I Need For a Down Payment?
The great news is, that many lenders will accept as little as 3% of the home’s purchase price as a down payment. To put things into perspective, the down payment could be as low as $12,500 or as substantial as $50,000 for a $250,000 home.
Before moving forward with a home purchase, it is important to discuss the down payment in detail and know exactly what you’ll be expected to pay. In addition to being the largest upfront expense, the down payment you choose will also impact your monthly mortgage payments, loan-to-value ratio, and potentially how competitive you appear as a buyer.
5. What Other Costs Should I Be Prepared For?
There’s no denying that buying a home can be expensive. Once under contract, you should be prepared for the following costs:
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Down payment: Remember, this is typically 3% to 20% of the home’s purchase price.
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Closing costs: These are due at the end of the transaction and usually cost around 2% to 5% of the home’s value.
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Earnest money and due diligence: With your offer, yourreal estate agent will request two checks — one for the escrow agent to hold until closing, and one to go to the sellers to show your intent to purchase the home.
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Moving expenses: You’ll likely need a moving truck, boxes, and professional movers at the very least. Price these out ahead of time and factor them into your budget.
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Maintenance fees: Not every home is move-in ready and will likely require some upfront costs to make it functional. Even if the changes are cosmetic, these maintenance fees can quickly add up!
6. How Much Can I Afford to Spend On a Home?
It’s easy to become enamored by the most beautiful homes on the market — and we don’t blame you! However, this can become dangerous if you aren’t aware of the amount you can spend beforehand.
While there are tools online to help you determine how much you can afford, don’t rely on these alone. Work with a lender to determine how much you can realistically afford to spend on a home. A mortgage pre-approval will give you a decent idea of what you can spend without breaking the bank.
7. How Do I Know Which Mortgage Is Right For Me?
The types of mortgage loans are practically endless, which is why we suggest doing your research beforehand. When deciding between mortgages, take into consideration your down payment, credit score, and finances. Ask yourself the following questions:
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How much of a down payment can you afford to put down — is it closer to 5% or 20%?
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Does your credit score need some work, or is it in good shape?
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Can you afford a 15-year mortgage with higher payments over a shorter period of time? Or would a 30-year mortgage with lower payments over a longer period of time work best with your finances?
8. Before Putting In An Offer, Do I Need to Be Pre-approved?
A pre-qualification is based on general information that you provide to the lender. Essentially, a pre-qualification letter indicates how much money you might be able to borrow. At this point, the lender has not verified any of your information, so the given amount has not been guaranteed.
A pre-approval, on the other hand, is a more in-depth process that requires a look at your credit score and supporting documentation. This shows sellers you’re serious about buying a home — and that you can afford it. Therefore, getting a mortgage pre-approval is highly recommended if you want to remain competitive as a homebuyer.
9. Should I Work With a Real Estate Agent?
When it comes to buying a home — especially if it’s your first one — a real estate agent provides exceptional value. Your real estate agent is your advocate and can negotiate for you when the time is right. They can also help you find quality lenders, locate desirable listings, link you with other professionals, guide you through the closing process, and much more. Working with a good real estate agent can make all the difference when purchasing your first home.
Buying Your First Home with Redbud Group
No one knows the housing market better than the Redbud Group. Get to know our team, take a look at our additional resources for buyers, and search our current listings. We love working with first-time homebuyers and would be thrilled to help make your first home purchase a great experience.
If you have any more questions about the home-buying process, contact us! We’re always happy to help.
