Our Top First Time Home Buyer FAQs Answered

Dated: 07/23/2020

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Purchasing a home for the first time can be just as exciting as intimidating. You may have many questions in regards to purchasing a home throughout the process. In this blog, you will find some of the most common questions first-time home buyers.

Mortgage-Related

How do I know if it’s time to buy instead of rent?
If you know where you want to live, have a steady and secure income, and are ready for the responsibilities of homeownership, then it’s a great time to invest in property. Owning your home will build equity overtime, while renting is commonly said to be "throwing away money." Equity, defined by Investopedia.com, "represents the amount of money that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company's debt was paid off."

How much do I need to save up for a down payment?
Traditionally, a conventional loan down payment is 20% of the sales price of the home - Which holds many people back from purchasing homes and lenders recognize there. There are many other types of financing that allow lower down payments. In MO, some lenders will allow conventional loans to put down 3% of the sales price of the home. Some other common loan types include:
- FHA Loan: 3.5% down
- USDA (Rural Housing, does not qualify for all cities): 0% down
- VA Loan (Veteran's Loan): 0% down

How do I know if I qualify for a loan and how much I can afford?
Contact a mortgage lender to get pre-approval for a loan (you cannot purchase a home without cash OR pre-approval!). The lender will ask you questions regards to your income and debts, and have you fill out an application. They can then tell you what amount you can be approved for, and how much your mortgage payments will be.

What does the lender need from me to give me a loan?
Usually, you are asked to provide your last two tax returns to show proof of income. You should also provide recent bank and credit card statements and proof of your current pay rate. You will also be asked for your social security number so they can run a credit check.

What’s the difference between pre-approved and pre-qualified?
While often used interchangeably, these terms don’t mean the same thing. Pre-qualification is an estimate of what you may be approved for based only on the verbal information you provide. Pre-approval means the lender has verified your income and debt information and run a credit check.

How do I know which mortgage option is right for me?
Your mortgage lender is the best person to advise you on this question. Their products and qualifications change from time to time, so they would know best what products are available to meet your needs.

Searching for a Home

What should I do when I see a house online that I like?
Call your buyer’s agent: The agent you are working with to find your home (me!). It’s best that you work with one real estate agent throughout your search because that person learns what you like, dislike and will invest time vetting properties for you. This person also represents your best interests only. When you call the agent advertising the home, you are dealing with the seller’s agent. While this agent can assist you throughout the process, they are also trying to get the best deal for the sellers.

Can you show me a house if it’s not your listing?
Absolutely. As a buyer’s agent, I can show you any house listed in our MLS system, and I will contact FSBO sellers on your behalf. As mentioned above, working with me as your buyer’s agent ensures that your interests are protected.

How do we write an offer?
When you find the property you want to make an offer on, I will run a Comparative Market Analysis (CMA) to help you determine a fair offer amount. I will also guide you through the additional terms of the contract, such as the escrow amount, closing date, and any additional terms you want to be added to the offer. I will write the offer on a contract form and submit it to the seller’s agent. In a situation where you have to compete for a home, I will help you write the highest and best offer.

What if I want to back out of a contract?
You always have the right to back out of the purchase, but you will lose your escrow deposit (an early down payment to your home, to display commitment). If the contract is contingent on a property inspection, you usually have the right to cancel for any reason during the inspection period. Once the inspection period has passed, you cannot back out and keep your deposit unless the seller agrees, or an additional term has not been met.

What happens if there are other offers on the house I love?
If a seller receives multiple offers on their home, usually their agent will inform the buyer’s that multiple offers have been received and the buyers have another opportunity to alter their original offer to present their “highest and best” offer. Keep in mind that many factors may influence the seller in addition to the offer price, such as the offer amount, type of financing, closing date, and inspection terms.

What happens when my offer gets accepted?
Once both parties have agreed on all terms and signed the contract, your escrow deposit must be made and you should schedule the home inspection. Your lender will receive a copy of the contract and will begin processing your mortgage application.

We’re Under Contract!

What does “under contract” mean?
Under contract means that all parties have agreed on terms, have signed the contract, and the signed contract has been delivered to both buyer and seller. Payment of the escrow deposit is expected but is not a requirement to make a binding contract.

What is escrow?
The escrow money, escrow deposit, or earnest money deposit is money that is offered with an offer, or as soon as an offer is accepted, to show the seller that you are serious about moving forward with the purchase of the home. Because you forfeit this deposit if you back out of the purchase for any reason not allowed for in the contract, the larger the escrow deposit, the more seriously your offer is taken.

Do I need an inspection?
YES. We always recommend that you have a home inspection done. In the scheme of things, paying a few hundred dollars to have peace of mind that there are no hidden dangers or problems is well worth the money.

How much are inspections?
The cost of the home inspection depends on the size of the house and additional inspections requested, such as swimming pool, septic tank, termites, insurance four-point (HVAC, plumbing, roof, and electrical,) wind mitigation, and radon. An average home inspection, without additional inspections, is about $300-400.

What if my loan doesn’t get approved?
If you have gone through the pre-approval process and have been forthcoming with all the information requested by your lender, it’s unlikely you will be turned down, but it does happen. Make sure you do not change jobs, purchase big-ticket items on credit, take out a car or boat loan, or open any other new credit accounts while your mortgage is being processed. If your loan does fall through, talk with your lender about changing to a different loan type.

When can I start moving?
When you have the keys after closing! When you are financing your purchase, it takes four to six weeks for your loan to be processed. Once the lender gives the all-clear, closing is scheduled. You will sign your loan documents and both parties will sign documents transferring ownership to you. Unless other arrangements have been agreed upon by both parties, the sellers should have completely vacated the home when they sign the closing papers. You can have your belongings ready to move, and a moving company scheduled before you go to closing. At closing, you will receive the documentation you need to provide utility companies with proof of your new residence.

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