The 6 Most Common Questions About Buying a Home
1. What’s the First Step?
While you might already be out house-hunting, there’s something else you should handle first: getting pre-approved for a mortgage. There are a couple of reasons why.
First of all, you won’t know what kind of home you can afford until you know roughly how much a lender is willing to give you. That right there is going to narrow down potential homes.
Secondly, your loan estimate is going to help determine your down payment and closing costs.
It might not feel as fun or romantic as shopping for your dream home, but getting pre-approved for a mortgage is a necessary first step.
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2. How Much Do You Pay Your Real Estate Agent When Buying a Home?
Here’s an answer you’re going to love: You’ll pay very little, if anything at all. Here’s why.
You have your real estate agent as a buyer. Similarly, the person selling their home has their own real estate agent. The seller’s agent will charge them a fee to represent them, list and market their property, and bring potential buyers to their front door. When they sell the home to you, your real estate agent will split the listing fee with the buyer’s agent. That’s how they get paid for their work.
Therefore, when you’re buying a home, you don’t personally pay your real estate agent. They’re essentially doing their job for you, free of charge.
3. How Much Should I Save Up for a Down Payment?
The rule of thumb has historically been to save 20% of the home’s total purchase price for a down payment. Is this still a good rule of thumb? Yes and no. Yes, because you’ll immediately own more of the home and pay less in interest, fees, and monthly mortgage payments. Furthermore, you’ll pay off your mortgage sooner. It also shows the lender that you have a reliable source of cash flow/income.
However, is 20% mandatory? No.
These days, you can purchase a home for way less. For instance, you can put as little as 3.5% down on a home, if you’ve secured a loan through the U.S. Federal Housing Administration.
This is a huge relief to aspiring homeowners because 20% can be incredibly daunting. So, know that you can put up a much smaller down payment. However, we still recommend that you strive for something higher, simply because it’s in your best interest financially.
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4. Can I Buy a Home If My Credit Score Isn’t Great?
Like the previous point about down payments, this one evolves over time, largely due to changing loan requirements.
Obviously, the higher your credit score, the better. But what does that mean, exactly? Very generally speaking, a score of 670 or higher is considered good. However, you can buy a home even if your score is lower. In fact, some lenders will still give you a loan even if your credit score is dipping into the 500s.
Do we encourage you to do this? Well, it depends on the reason why your credit score is so low. For example, an individual unable to keep up with mounting credit card debt might not be in the best place financially to buy a home. If you’re not sure where you stand, talk to a financial expert you trust. Your loan officer can also help you understand what you need in order to responsibly qualify for a loan.
The point, though, is that you don’t have to have perfect credit to buy a home. Lenders offer a variety of plans so that you can find something that meets your needs.
5. Would Renting Be Better?
Buying vs renting is a long-standing debate. Both have their own unique pros and cons, and what’s best for one person might be the wrong move for the next.
If you’re looking for something that costs less upfront and which you ultimately aren’t responsible for, renting can offer that. However, if you’d like a home you can invest in and totally call your own, buying a home has never been more doable than it is today. Also bear in mind that depending on where you live, buying a house might actually end up being cheaper than renting! You have more control over your property and can walk away with an awesome return on your investment.
All of this is going to depend on your goals, interests, and current financial situation. Buying a home understandably feels like a scary commitment. In many cases, though, it’s the right call.\
6. Do I Really Need a Real Estate Agent?
This is an easy one. Yes, yes, and yes again.
The process might seem simple, but there are too many things that can go wrong if you don’t have the guidance of an experienced professional. Your real estate agent will handle negotiations, make sure you’re protected, guide you through the paperwork, and will generally prioritize your well-being. They know things and have access to information and resources that other people don’t.
Can you buy a home on your own? Sure. But why take any risks when you can count on someone else to handle all the details for you — at no charge to you, no less?
A qualified real estate agent truly is the backbone of the home-buying experience, especially if you’re moving out of state. We know that choosing one can be hard. There are so many options, and a lot of agents look the same.
At The Brendan King Group, we like to let our testimonials speak for us. Ready to find your dream home? Contact us today and tell us what you’re looking for. We’re happy to help.