First Time Home Owner FAQ

How much money do I need for a down payment?

This is a very common question, and the answer might surprise you! While a 20% down payment is often discussed to avoid Private Mortgage Insurance (PMI), it is not a requirement. Many loans, particularly those backed by the FHA, allow for down payments as low as 3.5%. Other conventional loans can be secured with as little as 3% down. The key is to find the right loan program for your financial situation.

What is a good credit score to buy a house?

Your credit score is a crucial factor, as it helps lenders determine your eligibility and interest rate. Generally, a score of 620 or higher is often the minimum for a conventional loan, while FHA loans can sometimes be an option for scores as low as 580. A higher credit score (in the 700s and above) will typically qualify you for more competitive interest rates, which can save you a significant amount of money over the life of your loan.

What are closing costs?

Closing costs are fees and expenses you pay at the end of the home-buying process. These are separate from your down payment and typically range from 2% to 5% of the home's purchase price. Closing costs can include things like loan origination fees, appraisal fees, title insurance, and property taxes. We'll go over a detailed breakdown of these costs together before you make an offer so there are no surprises.

How do I get pre-approved for a mortgage?

Getting pre-approved is one of the very first and most important steps in the home-buying process. It involves a lender reviewing your financial information (income, debts, credit history) and giving you a conditional commitment for a loan amount. A pre-approval letter shows sellers that you are a serious and qualified buyer, which can be a huge advantage in a competitive market. It's a simple process, and I can connect you with trusted local lenders to get you started.

What is the difference between a fixed-rate and an adjustable-rate mortgage (ARM)?

A fixed-rate mortgage is the most common type, where your interest rate remains the same for the entire life of the loan (e.g., 30 years). This means your principal and interest payment won't change, giving you stability and predictability. An adjustable-rate mortgage (ARM), on the other hand, has an interest rate that is fixed for an initial period (e.g., 5 or 7 years) and then adjusts periodically based on market indexes. ARMs can be a good option for people who plan to sell or refinance before the fixed-rate period ends.

How do real estate agents get paid?

Real estate agents are typically compensated through a commission paid by the seller. This means that as a buyer, you generally do not pay your real estate agent directly for their services. This allows you to have professional guidance, market expertise, and negotiation skills on your side throughout the entire process, all at no cost to you.

What is "earnest money"?

Earnest money is a good-faith deposit you make when you sign a purchase agreement. It shows the seller that you are serious about buying the home. The amount is typically between 1% and 3% of the purchase price and is held in a neutral third-party account. If the sale goes through, the earnest money is applied toward your down payment or closing costs. If it falls through due to a valid reason outlined in the contract, it is typically returned to you.

Do I need a home inspection?

While not always required by a lender, a home inspection is highly recommended and is a crucial step to protect your investment. A professional inspector will thoroughly examine the home's structure and systems (like the roof, foundation, electrical, and plumbing) and provide you with a detailed report. This allows you to identify any major issues before finalizing the purchase and gives you the opportunity to negotiate repairs with the seller.

How long does the home-buying process take?

The timeline can vary, but a typical home purchase from accepted offer to closing takes about 30 to 60 days. The length of time depends on factors like your loan type, the complexity of the property, and how quickly all parties can work through the necessary paperwork. Getting your financing pre-approved early can significantly speed up the process.