7 Things You Need to Know Before Buying Your First House

August 28th, 2017

Buying your first home is usually about 80% exciting and 20% overwhelming. However, with the proper knowledge going into the process, it can be 100% exciting. Here are seven things you should know before buying your first home:

1. The home buying process takes longer than you may expect.

Unlike buying a car, you generally can’t buy a house in a single day. On average, it takes 30-45 days from the time your offer is accepted to the time you close on your house.  

2. Getting pre-qualified is important.

Pre-qualifying for your loan helps in two ways. First, it helps you determine the price range of houses to consider in your search. Second, it can potentially help cut down on the time it takes to close on your new house. In order to pre-qualify for your loan, you’ll need to talk to your chosen Mortgage Lender. Your mortgage lender doesn’t expect you to understand and navigate the home buying process yourself. It’s their goal to assist you in every step of the process, and answer any questions you might have along the way.

3. There are different home loan options.

Conventional Loans – These loans are usually backed by Freddie Mac and Fannie Mae (these institutions assume the risk). They typically require you to have at least 5% of the loan for your down payment, though both offer 3% down programs when certain criteria are met.

Government-Sponsored Loans – These loans are backed by the government and generally have lower credit and down-payment requirements. The most well-known government-sponsored loan are FHA loans and VA Loans.

Several states have bond programs available for first-time homebuyers which allow new homebuyers to obtain a loan with smaller down payments. These programs typically have household income caps.

Not sure which loan is best for you? Your Mortgage Lender can help with that.

4. The seller pays the buyer’s realtor.

Typically, realtors receive 6% of the sale of the house (3% to the buyer’s realtor, 3% to the seller’s realtor). As a buyer, you are not responsible for paying realtor costs. That responsibility falls on the seller. Therefore, it is generally recommended to use a realtor when buying a house (especially if it’s your first time). A qualified realtor is not only helpful in finding your dream home, but he or she also understands the home buying process and can guide you through its various nuances.

5. There are closing costs.

Closing costs are expenses associated with the actual transaction of buying/selling a house. They are not included in the sale price of the house. Though many first-time home buyers may have heard of closing costs, they are often not aware of how much the costs will end up being. Typically, closing costs amount to 2-5% of the sales price. These costs are in addition to the down payment and need to be paid upfront. Amongst other things, closing costs pay for inspections, appraisals, title service fees, taxes, surveys, recording fees, etc. Buyers can often use closing costs as a negotiation tool. In other words, rather than asking the seller to come down on the price, you may be able to request that the seller covers closing costs.

6. You may have to pay Mortgage Insurance.

For conventional loans, mortgage insurance is required if you put less than 20% down on your house (loan dependent). Mortgage Insurance (sometimes known as private mortgage insurance or mortgage insurance premium) protects the lender if you default on your loan or fall behind on payments. Once you’ve paid off more than 20% of the value of your loan, you can request to have the Mortgage Insurance removed.

7. Your mortgage covers more than just your house payment and interest.

In addition to the principal and interest that you’ll pay on your loan, mortgage payments also typically include taxes, home owner’s insurance and Mortgage Insurance (when necessary).

If you have more questions about the home buying process, or are ready to prequalify for your loan, contact a Mortgage Lender near you!