Ten Common Home Buying Questions

Ten Common Home Buyer Questions Article

Summary: From earning equity to utilizing a cash-out refinance, purchasing a home is a financial investment with great benefits. It is an exciting adventure but also one full of questions. We have answered ten common home buying questions to help guide buyers with their home purchase.

Purchasing a home is a financial investment that holds numerous benefits but also one full of questions. As an expert mortgage lender, we are here to help! We have answered ten common home buying questions to help guide buyers with their home purchase.

Ten Common Home Buying Questions

1. Am I Ready to Own a Home?

  • Buyers who have a good credit score, a stable income, and money saved for a down payment are likely ready to buy a house.
  • If you see yourself living in a location for five or more years, you may also be ready to purchase a home.
  • Contacting your mortgage lender is a great way to know if you are ready– mortgage lenders will provide you with ample resources and ask questions to both better understand your finances and advise you.

2. Can I Afford a Home?

  • A general rule in the housing industry, depending on your mortgage type, is any buyer that has a debt-to-income ratio (DTI) of 43% or lower can afford a home.
  • A pre-approval letter spells out the loan amount, type, and terms available to a borrower to inform how much home they can afford.
    • It is always advised to know how much home you can afford before shopping.

3. Should I Talk with a Mortgage Lender Before Looking at Homes?

  • If you are ready to buy a house, the first call should be to your mortgage lender.
  • Mortgage lenders are great resources when it comes to choosing a mortgage type that best fits your needs, understanding your loan amounts and limits, and answering all home related questions.

4.What Credit Score Do I Need to Buy a House?

  • Credit scores differentiate based on the loan type.
  • A minimum credit score of 500 can qualify borrowers for an FHA loan while a minimum credit score of 620 can qualify others for a conventional loan.
  • The higher the credit score, the better the loan terms and the lower the interest rate.
  • Contact your mortgage lender to learn more about credit score requirements.

5. Do I Really Need a Realtor?

  • Realtors not only help you search for your home but also represent your best interest during the home purchase.
  • Realtors offer knowledgeable advice on the housing market’s condition.
  • They help assess neighborhoods and homes, schedule tours, negotiate, and write up contracts.

6. Which Mortgage Is Right for Me?

  • Whether you are a first-time home buyer or a seasoned homeowner, there are many types of mortgages and terms that fit all homebuyers needs.
  • Loan terms:
    • Fixed-rate loans
      • 15- year
      • 30- year
      • Flex term
    • Adjustable-rate loans
  • Loan types:
    • FHA (Federal Housing Administration)
      • FHA loans are backed by the Federal Housing Administration and used on primary home purchases only.
      • The loan expands homeownership by giving homebuyers more flexibility with lower credit limits and higher debt-to-income ratios
    • VA (Veterans Affair)
      • VA loans are backed by the U.S Department of Veterans Affairs, and are available to current military members, veterans, and qualifying surviving spouses.
      • The program provides no down payment, no private mortgage insurance, no prepayment penalties, and low-interest mortgages to qualifying members.
    • USDA
      • Backed by the United States Department of Agriculture.
      • USDA home loans are designed to both expand homeownership and improve the quality of life in rural America.
    • Conventional
      • Can be used on a primary, secondary, or an investment property purchase.
      • There are two forms of conventional loans: conforming and non-conforming.
        • Conforming loans follow a set of guidelines regulated by the Federal Housing Finance Agency (FHFA) such as credit score, range of debt, size of the loan, and more.
        • Non-conforming loans do not follow such guidelines or standards set by the FHFA.
    • Jumbo
      • A jumbo loan is a form of a non-conforming conventional loan.
      • Jumbo loans have higher credit score, down payment, and debt-to-income ratio (DTI) requirements.
      • Jumbo loans are great for borrowers wishing to purchase a home beyond the price range of conforming loan limits.
    • Adjustable-Rate Mortgage (ARM)
      • A loan option with a set interest rate that fluctuates after a chosen period and resets periodically to the current rates.
      • A great option for borrowers who see themselves in flexible life situations.

7. How Much Are the Closing Costs?

  • Closing costs range between 3% to 5% of the entire loan amount.
  • Depending on your loan type and if you are a first-time home buyer, some borrowers may receive assistance to help pay for closing costs.

8. What If My Offer Is Rejected?

  • An offer being rejected is normal, natural, and part of the home buying adventure.
  • If your offer is rejected, you can place another offer at a higher monetary amount.

9. How Much Are Homes Selling for in the Neighborhood?

  • Being aware of how much homes are being sold for within your desired area will help you know if the home you want is set at a reasonable price.

10. How Is the Neighborhood?

  • You can always renovate your home but not your neighborhood.
  • Understanding your neighborhood helps you understand the community you will live in for the next five or more years.
  • Your realtor can help you find information on crime rates, school ratings, traffic, development, and other community aspects of the neighborhood.
  • Driving around in your prospective neighborhood can also give you an idea of the atmosphere.

For more information, chat with us at callhallfirst.com or give us a call at 866-Call-Hall.