Home Buying Tips for the First Time Homebuyer
From the Credit Check to Getting the Keys: First-Time Homebuyers, You’ve Got Questions and We’ve Got Answers
Are you new to the home-buying process? Whether you’re just looking, searching for your dream home or just looking to learn more about buying a home - there’s a lot to learn. The home-buying process can be confusing, long and just as stressful as it is thrilling. At times you’ll want to celebrate and sometimes you’ll feel like you’re drowning but in the end, owning a home makes it all worth it.
In the meantime, we’re sure you have tons of questions about buying a home and we have answers to soothe your first time home buying fears.
I’m thinking of buying a home. Where do I start?
DO YOUR RESEARCH! If you haven’t completed any internet searches about homes in your area, mortgages or steps to saving for a downpayment, then sit down and Google your heart out. If you have and you’re ready to really get into the home-buying process and have some money saved for a downpayment, then schedule a time to talk with your bank and various mortgage companies and brokers. They can discuss different mortgage options and get you pre-approved for a loan.
What is the minimum credit score for buying a home?
Generally, your credit score needs to be 700 or higher but a lower credit score doesn’t mean you can’t buy a home. A credit score below 700 may mean that you have to pay a higher interest rate, qualify for a Federal Housing Administration (FHA) loan. If you have a credit score of 580 an FHA loan is a good option but you’ll have to pay mortgage insurance which will increase your monthly payment.
What are points?
Points, or discount points, are fees that the buyer pays to the lender during closing in exchange for a reduced interest rate on their mortgage. One point is the equivalent of 1% of your mortgage amount, and while they cost money up front, they can save you potentially thousands of dollars in the long run.
Do I need a real estate agent?
A real estate agent handles all negotiations between buyers and sellers during the home-buying process. When an agent is representing a buyer, they help their clients find the best property at the optimal price and aid them through the process. Realtors representing sellers market their client's property, help them find qualified buyers, and help them get the best price for their property.
Who pays the real estate agent?
The seller is generally responsible for paying the Realtor's fees and commissions since the agent represents them and help them make the sale. The seller's agent typically splits their commission with the buyer's realtor—that's how the person representing the buyer makes money on the deal.
What is earnest money?
Earnest money, or a good faith deposit, is a deposit the buyer makes once their offer is accepted. This shows their commitment to buying the property and is applied to the down payment once the sale goes through or closes.
How long does it take to close?
According to the Balance, most federally related mortgage loans can close within 30 days. Special first-time home buyer programs, particularly those involving help with the buyer's down payment, might take 35 to 45 days to close. Closing time is dependent upon various factors such as the type of loan, the underwriting process, etc.
What is a “closing” is exactly?
At closing, the buyer provides a check for what they owe on the home, the seller signs over the deed to the buyer, the title company registers the new deed to the home and the seller receives any profit they earned from the sale.
How much does a closing cost?
Both the buyer and the seller are responsible for closing costs but they differ. Investopedia notes that the average total closing costs on a $200,000 home purchase in Alabama is $1,842. This figure is slightly below the national average, which sits at $1,847 as of 2016. Lender fees of $1,066 and non-lender fees of $776 make up an average closing cost scenario in Alabama.
Who pays closing costs?
Both the seller and the buyer have closing costs to pay, but they differ a lot. According to Zillow, the seller's costs are usually higher (since they pay the Realtor's commission) but they cover fewer costs in general. The buyer, on the other hand, pays for more line items. Those items include several fees, from appraisal fees and origination fees to bank processing fees and title insurance.
How much does the inspection cost?
According to HomeAdvisor, the average cost of a home inspection in 2018 is $325 but could cost as low as $200 or as much as $480.
Who pays for the inspection?
The buyer pays for the home inspection which typically is an out of pocket expense before closing BUT you may be able to negotiate that with the seller.
What and when is the final walk-through?
The final walk-through takes place after the inspection and is usually scheduled for the day before closing. This is your opportunity to check the house before the settlement, to make sure everything is in good shape and that any repairs the seller was required to make were completed.
Do I need homeowners insurance?
Although homeowners insurance isn’t always required, it’s still a great thing to have. Homeowners insurance comes in handy if (more than likely when) your home is damaged by natural disasters like floods, tornadoes, etc. It also protects you from liability in case someone gets injured on your property.
When do I get the keys?
Usually, you'll get the keys to your new home at closing, or after closing if you need to wait until your county official records the title (which could take a few days) or if there's a delay with your loans.
Re-edited from a post originally published 1.11.2018 - AT