1. Why do I need to talk to a bank before starting to look for homes?
Talking to a bank will help you determine how much you can afford. If you are a first-time homebuyer, there may be programs your bank knows about that are applicable to your personal situation. Also, there are additional costs associated with purchasing a home that your bank can help bring to light to ensure that you are fully aware of the financial decision you are making. Also, a mortgage professional will help you find the best interest rate that you can get based on your financial history and credit score.
2. Why do I need a Real Estate agent to help me buy a home? Can’t I just work directly with the seller or seller agent?
Getting a Real Estate agent will be one of the best financial decisions you might make when buying a home, yet most of the time, you don’t even have to personally pay the agent. Your agent’s fee will likely come from the seller and/or the listing agent. Your agent will help you through every aspect of the buying process. An agent will find out your preferences and requirements and find homes that you might not otherwise have access to and give you advice based on the current market and local area. Agents help with the negotiation process. An agent advocates for your best interests. They help with the vast amount of paperwork and make sure you understand every step of the transaction. A Real Estate agent likely knows the industry better than you do and will be someone you can trust to help you with one of the biggest decisions of your life.
3. What kind of credit score do I need to purchase a home?
In most cases, you will need at least a 620 credit score or higher to get the best interest rate. The higher your credit score, the better your lending terms will be. There are some lenders who will approve home buyers with a score of 600 or less, but most likely, the interest rate would be higher than it would with a higher credit score.
4. How much money do I need for a down payment?
For an FHA loan, you usually need between three and five percent. For other conventional loans, ten to twenty percent is recommended or required.
5. What are the costs outside the loan and the down payment?
Many home buyers miscalculate the costs of purchasing a new home. In addition to the down payment, there are generally closing costs associated with a home purchase. You also need to consider the costs of taxes, homeowners association fees, home inspection costs, utilities, homeowners insurance, and any repair or maintenance fees. Always be prepared to make some repairs to the home, whether it’s new or old. Have approximately three months of living expenses saved up in addition to the down payment and closing costs for an emergency repair fund. Always know beforehand the costs of utilities and taxes, so there are no surprises.