Buying a home for the first time can feel exciting and overwhelming all at once. You’re taking a big step, making the largest purchase of your life (probably), and hey, it’s fun to shop for houses. Still, you probably have a lot of questions. Here are answers to the most frequently asked questions from first-time homebuyers:
Q: What do I do first?
A: Once you’ve decided to buy a house, the first thing to do (aside from saving) is to learn as much as you can. There are quite a few processes that go into homebuying and a lot of decision making needs to happen. The U.S. Department of Housing and Urban Development has a lot of useful information, including counselors that can answer many of your questions for free. Lifehacker also has a fun start-to-finish guide to buying a home.
Q: How do I choose a real estate agent?
A: Once you at least have a grasp on the basic process, your next “first” step is to interview real estate agents. Chances are, you know at least a few. If not, ask around, and someone you know will have a recommendation. While any agent can help you through the process, it’s important to choose someone you can trust, someone you feel fits well with you and your partner. This person is part of your team and will negotiate for you.
Q: How do we find a loan?
A: Just ask! Banks, credit unions, mortgage companies, online lenders — All are willing to speak to you about a home loan. Be sure to shop around and find out who has the best offer.
Q: What if I don’t have a great credit score?
A: A perfect credit score is not required to buy a home. But it is something to consider when deciding whether it’s time to buy versus renting. The lower your score, the higher your interest rates will be. If your timeline isn’t urgent, you might consider holding off on buying a house until you can improve your score. Pay all bills on time; make sure to have a few lines of credit open and used. And watch your report for any problems. However, if you are ready to buy now, be prepared to shop around for the best loan rate you can find. It helps to have a larger down payment.
Q: How much should we put for a down payment?
A: As much as you can afford. If you own a car, you know what it feels like to make those payments each month. The lower the loan, the lower the monthly payment. Some people make a goal of saving up 10 percent or 20 percent to put down. What figure you choose is up to you and your budget and timeline. One reason to consider 20 percent: you won’t have to pay for PMI.
Q: What is PMI?
A: Private Mortgage Insurance. If your down payment is less than 20%, you will pay for this insurance as part of your monthly mortgage payment. The policy protects the lender in case you don’t make your house payments and they have to sell it for less than the amount left on the loan.
Q: How much are closing costs?
A: In North Carolina, closing costs add up to between $1,500 and $3,000. Here is a nice breakdown of mortgage closing costs. (Note: we’re not endorsing this particular company.)
Of course this just scrapes the surface on the list of questions you have when buying your first home, but we hope this will get you started. Best of luck!