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5 Questions you may have as a First-Time Home Buyer

Updated: Jan 17, 2021

Buying a house can seem like a daunting task. With terms like pre-approval, title insurance, deed restrictions, and fee simple estate being thrown can be hard to understand what is going on. And, to top it off, a house is the most expensive thing you’ll ever buy. Stressful, right?

Well, it doesn’t always have to be THAT stressful. A little knowledge will go a long way in the home buying process. You’ll feel more comfortable and be able to ask the right questions. To help out, I have compiled a list of first-time home buyer tips that I wish I knew when my wife and I bought our first home.

Without further ado, I present 5 common questions asked by first-time home buyers.

1. How do I get started?

Get pre-approved, not pre-qualified, before looking for houses. These terms often get confused and used interchangeably, but they are very different. To be pre-qualified means the bank will ‘probably’ give you the money you need to buy. It is just an estimate, but nothing final. Most lenders won’t ask for much information before they pre-qualify someone. However, being pre-approved means you know how much you will get from the bank for a mortgage. In a competitive market, it is essential to get the pre-approval first before you even look at homes. Sellers often won’t take a buyer seriously without one, even if you offer well above asking price.

2. How much do I need for a down payment?

Most lenders expect more than 5%-20% for a down payment. Paying 20% or more could save you hundreds or even thousands of dollars a year because you won’t have to pay PMI or private mortgage insurance. PMI is an insurance that protects the lender in case you stop making payments and it usually gets dropped once 20% of the homes appraised value is paid. This is pretty standard. PMI isn’t anything to plan your life around, but it is nice to not pay for it each month. But, obviously, don’t put more down than you are comfortable with. If you can only do 5%, do 5%.

3. Will I have to pay my real estate agent?

Nope. Typically the seller pays the commissions for both the buyer’s agent and seller’s agent. So don’t worry, you won’t get a surprise bill for thousands of dollars at the end of your home buying process.

4. Someone told me that a bank won’t give a loan for more than a home is appraised this true?

Indeed it is. It can be scary in seller's markets (more demand than supply) because the home prices are higher than usual, meaning sometimes an offer you put on a house will be more than the house appraises for. For example, if you offer to buy a house for $150,000 and it is appraised for $145,000, you have a couple of choices. First, you can appeal to your lender about the appraisal and see if they can redo it. Second, you can make up the difference in cash. So you’d pay $5,000 extra. First-time buyers will normally move money around from their down payment to cover this.

5. How do I pick a real estate agent?

Do your research and ask your friends & family. Most agents have specialties like certain neighborhoods or price ranges. You want to make sure you are dealing with someone who is well versed in walking first-time clients through the process of home buying. A luxury realtor probably won’t give you the time of day when you want to see houses, so pick someone you feel comfortable with.

I hope this helps and, as always, feel free to reach out for all your real estate needs.


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