Home Buyer FAQs
Buying a house is a lot to wrap your head around, especially as a first-time home buyer. If you know what to expect, it doesn’t have to be stressful or confusing.
What do I need to do to get the home buying process started?
The first thing you will want to do is get pre-qualified with a reputable lender. Contact us for our recommended lender list. This will allow you to know exactly what you qualify for and give you the opportunity to double check and make sure there are no credit issues that you did not know about.
How much do I need saved up in order to purchase a home?
This one will vary from person to person so I will go through a few scenarios for you:
- FHA is the most common loan type. This loan requires 3.5% as a down payment.
- VA is commonly used and if you qualify for a VA loan you can get 100% financing.
- Conventional loans are sometimes used for first time buyers and typically this loan requires 5% down.
- The percentages mentioned here are percentages of the purchase price. Another cost is closing costs. These are typically 2.5%-3% of the cost of the home. These are negotiable and depending on the market and if there are multiple offers or not will determine how much of this cost, we ask the seller to cover. There are ways you can pay this without paying the cash up front if we are in a situation where the seller is not paying much or any. You can up the sales price and roll the closing costs into the loan. We can slightly increase the interest rate (if you qualify with your credit) and roll a portion into the rate. During the inspection period, if there are repairs or maintenance needed, we can ask the seller to credit us the cost of repairs in the form of closing costs and you can do the repairs after you get into the home (if its something minor that you are comfortable doing or contracting out the work).
What are the costs, outside of the down payment that I will need for my home?
EARNEST MONEY – this is essentially a deposit on the contract. It will be applied towards your cash to close and if you are getting 100% financing and have no other fees, you get this back at closing. Earnest money typically ranges from $1,000 to $5,000. This amount is negotiable but normally stays closer to 1% of the purchase price.
INSPECTION – with a purchase this large, we always recommend getting an inspection done on the home. These typically range from $350-$500. These inspection companies also offer additional services such as mold, radon, and rodent inspections for an additional fee. This is typically paid directly to the inspector at or before time of inspection
APPRAISAL – the lender will require an appraisal on any property you purchase. An old appraisal may not be used. These are normally $500 and will be paid to the lender for the lender to order.
What if I come up short on money throughout the process?
Gifts are acceptable for the down payments. There are rules on who they can come from and family members are the most common. The lender will need a copy of the bank statement from the person giving the gift, so make sure this person is willing to gift the money as well as provide a copy of their bank statement.
What if I change my mind and do not want to purchase?
You have a “due diligence” period in the beginning of the contract. You will do all of your inspections during this period. If you decide you do not want to move forward, we terminate the contract and you get your earnest money back. The only expense you would not get back is the cost of the inspection. During the due diligence period, you can cancel the contract for any reason.
FINANCING CONTINGENCY – if you are getting a loan, its important to get all of your documents the lender will require to the lender ASAP because if you end up getting denied, you may exit the contract if the lender denies your loan while you are still in your contingency period. This is formally 21 days but is negotiable.
APPRAISAL CONTINGENCY – any contract you enter to purchase a home should have an appraisal contingency in it. If the appraisal comes in below the contract price, you have a few options. You can request that the seller reduces price to appraised value, you can pay the difference in cash, and if the buyer and seller cannot come to an agreement the buyer may terminate the contract and get the earnest money back. You would lose the cost of the inspection and appraisal at this point in the process.
How long will the whole process take?
A normal transaction takes around a month from start to finish, once you find the home. There are lenders who can do it as fast as 8 days.
What documents will the lender require me to provide?
- Copy of your ID
- At least 2 months bank statement
- At least 2 pay stubs
- 2 years of tax returns
- Copies of your W2/1099
- They may ask for some other documents based on your job/income. Sometimes they will ask for the same document multiple times so a good practice when you gather these documents the first time is to put them all in a place that you can easily access in case the bank needs another copy throughout the process.
How long is closing?
The closing is typically 1 hour. If you are closing at the very end of the day or month, they can be longer if the attorney has gotten behind.
We will do at least 1 walk through the day of or the day before closing. This will ensure that you know the condition of the home and if the seller was supposed to leave appliances or personal property behind, we can make sure these items were left with the home.
Can I move in before closing?
This is not recommended and can complicate the purchase.
Can I buy furniture and appliances for my new house before closing?
Run any big purchases by the lender prior to buying these items. If you are applying for credit, this could change your credit score and could impact you qualifying for the loan.
Do not apply for ANY credit without talking to the lender first.
What is PMI?
PMI stands for private mortgage insurance. Most lenders require that you pay for PMI if you put less than 20% down on a home, and PMI would protect the lender if you defaulted on your loan payments.
What if my credit needs work?
This happens frequently and lenders are your best resource. A lender will pull your credit, after receiving your application, and review your history. You can also shop up to 3 lenders without it majorly impacting your credit score within a 30-day period. They have programs that will give them scenarios on what your credit score will be if you pay down or pay an account off. They can also submit these to get your score changed once the accounts are paid and this typically takes about a week to get your new score once the accounts are paid to the balances the lender instructs.
Start to finish in a nutshell
- Get pre-qualified with a lender to know the total amount you can afford
- Time to shop. Look at houses and pick out what you want and where you want to live.
- Write an offer and get your offer accepted.
- Inspections. This time period is referred to as your due diligence period. During this time, you can do any inspection you would like on the home and back out of the contract with no penalties for any reason. This time period is typically 10 days and is negotiable.
- Amendment to address concerns. This amendment is put together after the inspections are complete. We will either ask the seller to make repairs that inspectors have suggested or ask for money to put toward these repairs.
- Appraisal. Most lenders will order this when the inspections are complete. This way you are not paying for an appraisal if you are unable to pass the inspection time frame.
- After the appraisal is complete, the lender will finish the loan and will send you multiple disclosures pertaining to the loan. There will be one sent out at least 3 days prior to closing that cannot change after that.
- During this whole process the attorney will pull title and ensure there are no liens on the home and if there are, they will work with the seller or title insurance company to clear these issues prior to closing.
- CLOSING!!! We will go sign all of the paperwork at the attorney’s office and get the keys to your new home!