A first time buyer has a lot of questions, so, we'd like to answer some of the most commonly asked.
Maybe you don't know where to start in your quest for a home purchase, or you've already begun looking into buying a home and need some help filling in the blanks.
Explore these first time buyer topics, use the form below for specific questions you might have, we're happy to provide answers. For even more helpful resources visit our Buying a Home Tool Box.
You'll also find a lot of answers by visiting the "Housing Market".
Owning a home may be your dream, but in order for the purchase to be the happy and satisfying experience it was meant to be, you need to ensure that you are financially and mentally prepared for the responsibilities that come with it.
Buying or selling a home, our company real estate blog provides amazing insights from expert Realtors and industry related professionals that can save you precious time and money.
Some people have a notion that home ownership is like renting, but with the power to have pets and paint the walls whatever color you like. However, while these privileges are available to homeowners in most municipalities, they come with the responsibilities of a mortgage, taxes and home maintenance. Preparing for home ownership requires you to take critical stock of your finances and your expectations.
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First Time Buyer Questions Answered
How much money do I need? What type of home loans work for me?
These two popular first time buyer questions can perhaps be the most difficult to answer, there are quite a few things you need to consider for both the purchase a home and also the maintenance and mortgage payments.
To ascertain with close approximation how much money you need to buy a home, you'll have to first consider your financing options.
If you purchase a home for $300,000, and you're using an FHA loan, your down payment is 3.5%, or $10,500, and the same for FHA 203k loans (for homes that need repairs). Depending on the lender you work with closing costs range from $3,000-$5,000.
USDA and VA loans are no money down financing, but you'll still have to have funds for closing costs. Conventional loans have down payments ranging from %5-%20, with a few lenders offering as little as 3% for higher credit scores. Realtors are an excellent source for lending referrals, as they have relationships with their local lenders and know which lenders have the right loan products best suited for your needs and goals.
Smaller fees may include a rey-key fee as with government owned homes usually around $150, sometimes utility activation fees ranging from $50-$125, and inspections can cost $300-$500 (highly recommended).
First Time Buyer Out-of-Pocket Expenses - Factor the Following;
- The amount down based on type of home loan.
- $4,500 for closing costs.
- $500-800 for miscellaneous fees including inspections.
Keep in mind, Grants and Down Payment Assistance can go a long way to reduce first time buyers' out of pocket expenses.
Monthly Mortgage Expenses
Once you decide on what type of home loan and down payment you'll have you can then get a firm idea of the monthly mortgage expense. Consider the following:
- Principal and Interest Payment
- Monthly Property Taxes: Property taxes can vary from county to county and city to city.
- Home Owners' Insurance: This ranges from several hundred to several thousand dollars annually and is impacted by things like flood zoning, credit score and other factors. A $300,000 home can carry an insurance expense of around $2,000 a year depending on the location and buyer's credit.
- PMI, or Private Mortgage Insurance: This is a monthly premium all mortgage lenders charge on loans with less than 20% down payment with very few exceptions.
Our mortgage calculator includes PMI for loan with less than 20% down and taxes. Discover what's comfortably affordable. It can be discouraging to find that your salary won't stretch as far as the home you want to own. However, sacrificing a huge part of your income just to pay the mortgage can very quickly make home ownership a burden rather than a point of pride. It's better to buy a modest home now and look at purchasing your "dream home" in a few years.
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I'm a First Time Buyer, are there Grants and Down Payment Assistance Available?
The answer to this question is yes, ranging from $1,500 to $20,000 in most cases but largely depends on where you intend to purchase. Many cities and counties are offer home buyers grants and incentives to purchase a home, and we can tell you what programs are currently available in your target areas.
More good news, you don't necessarily have to be a first time buyer, but just meet criteria like not owing on a current mortgage and haven't purchased a home in the last three years.
Yet even more good news, very often grant funds awarded but exceeding the down payment may be used towards renovations and refurbishing your home.
Additionally, there are programs like OHFA, the Ohio Housing and Finance Authority which can contribute 2.5% of the purchase price toward the down payment. So, fore instance, if you have an FHA loan at 3.5% and use OHFA, your down payment becomes a mere 1%. This program is only for certain eligible areas like USDA loans.
Request Down Payment Assistance or a First Time Buyer home loan today.
*Your information will never be shared with any third parties.
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I Want to See a Home, Who Should I Call?
Perhaps you're driving around and see a for sale sign in the yard, do you call the number? What many first time buyers don't understand is you work with one agent at a time; if you're a buyer you'll want to work with a professional buyer's agent.
If you are dissatisfied with your current agent, you can choose to work with another.
First Time Buyer Tip: You're entitled to professional representation, and since all commission fees are paid for by the seller it doesn't cost you anything to work with a professional buyers' agent. If you call the name and number on the yard sign, you're calling the listing agent representing the seller who has an agreement to net the seller as much as possible. It's in your best interest to work with a buyers' agent.
Property Search Tip: Clicking "Inquire" or "Schedule a Showing" on any listing on this site will get you connected to a professional buyer's agent whose job is to represent you, save you money and protect your best interests. Working with a buyer's agent can save you substantial dollars and help you avoid potentially devastating mistakes.
Using our property search ensures you'll not only find all available likely listings, but connect with a true local professional.
What Type of Home is the Best Deal?
There are a lot of misconceptions out there as to "what the best deal is". As Realtors, we hear it all the time, buyers specifically seeking foreclosures or HUD homes in particular, or sometimes homes crafted by a certain builder which is fine. However, just to clarify for the first time buyer, you're best off seeking a home within your budget that meets your needs and goals and not worry about the type of ownership be it a foreclosed property or HUD home or other type of property.
There's basically no difference between a foreclosure or HUD home except for who guaranteed the loan. For example, if the home owner defaults the property goes back to the bank as an "asset". However, if FHA (the Federal Housing Authority) guaranteed the loan (an FHA loan) the home would then go to HUD. Housing and Urban Development is a private entity contracted by the government to give first opportunity to would-be owner occupants first, then offer it up to investors as well if they don't receive an acceptable bid.
A short sale is simply a home that is for sale where the owner is "upside down" on their home, owing more than the home is worth. An owner facing this is attempting to avoid the bigger negative credit impact of foreclosure. The bank agrees to a short sale and these homes are generally in good condition, and you can expect whatever discounts are common with the current market. It can take months to hear back on a short sale offer, and some banks will continue to receive and review offers from other buyers even though your agent has submitted on on your behalf. If you have a more urgent need to buy, short sales may not be for you, especially not knowing for lengthy times whether your offer is successful.
First Time Buyer Tip: Only a licensed Realtor may place a bid on a HUD home for you.
Property Search Tip: What's important is the condition of the home, location and what it can be bought for. Why narrow your house hunting to just one or the other and cheat yourself out of possibilities? One day the best deal could be a HUD owned home, the next day it might be a foreclosure, or even a traditional listing where the owner just has an urgent need to sell. Get the most out of your property search, be open to all types of homes and you'll be much happier with the results.
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What About Homes that Need Repairs?
Many first time buyers set out on a quest to find a home they can purchase and fix up themselves and save money; a wonderful goal. What buyers who are financing should know is you are prohibited from doing the repairs yourself. There is a cost effective solution for first time buyers in this situation in the form of an FHA 203k renovation loan. The cost of repairs are built into the mortgage and many lenders that do FHA and FHA 203k loans can work with challenged credit scores.
You do get choices of materials, colors and styles, type of appliances and you can still do many things yourself such as painting to save money. The benefit is the repairs are done by professionals approved by the lender, and you can suggest professionals you'd like to use to your lender.
For more information on or to get pre-approved for an FHA 203k renovation loan, submit a request through our Home Loan Services.
Should I have the Home I'm Buying Inspected?
We highly recommend inspections. A home inspector will check for signs of harmful materials like asbestos, lead paint and mold. They'll also check for evidence of pests, faulty wiring and leaks. This is a crucial part of the home purchase.
Not getting an inspection done means that you could be stuck in a home with a bad case of black mold and no recourse other than to pay for its removal. Inspections will cost a few hundred dollars, but again, this is more than worth it in the end. There are several inspectors in your local area our Realtors can recommend.
First Time Buyer Tip: In addition to who our Realtors can recommend for inspections and repairs, see our Best Vendors.
First Time Buyer Tip: Do a final walk-through with your Realtor the day before or even the morning before closing. This ensures that everything has been handled and taken care of as agreed upon in your acceptance. Once you're handed the keys at closing you have no recourse. Should their be vandalism or something left undone that was agree upon, you could be left "holding the bag".
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How do I Make an Offer on a Home?
Making an offer on a home is done through your buyer's agent. Your agent will fill out your offer paperwork with any negotiable requests, attach your pre-approval letter from your lender or proof of funds if you're buying cash and submit it. You may hear back immediately, or it make take a few days to get a response.
If it's a HUD owned home, the agent will place a bid on the home for you, you cannot bid yourself, and again the pre-approval letter or proof of funds must be attached. Writing an offer can be complex, and another reason we advise to work with a buyers' agent who has your best interests at heart.
First Time Buyer Tip: This is why getting pre-approved is so crucial. Offers can't be submitted without this document demonstrating financial ability to buy, unless you intend on a cash purchase. Visit our Home Loan Service for a pre-approval.
How Long Does the Home Buying Process Take?
There are several steps in the home purchase process and each of them take time. Once the purchase contract is signed by all parties, the path to the closing table has a few things that need to be completed first. There are the home inspections, then the appraisal, then underwriting reviews all of the documentation and the file is submitted to the title company for further evaluation, title search, etc.
Assuming there are no issues with the title search; there are varying times involved for completion of a home purchase. A cash purchase affords a buyer the fastest close. Cash closings can be completed in 1 to 2 weeks. A conventional loan purchase can be done in 2-4 weeks. An FHA purchase takes 4-6 weeks on average to close. A USDA no-money down mortgage takes about 6-8 weeks to close on the home. An FHA 203k renovation mortgage takes about 6-9 weeks to close.
If you are purchasing a "short sale" home; you will need to add several weeks if not months to the entire process. Short sales have been known to take as long as 2 years to close or even not at all.
It is in a buyer's best interest to correspond with their lender in a timely manner and return/supply all loan documents as requested. Delays in getting the required information to the lender can have a huge impact upon the length of time to close on the purchase.
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First Time Buyer Questions Answered!