The home buying process can be pretty scary. But it doesn’t have to be, as long as you do a little bit of research on what to expect. Of course no deal is the same, but as long as you’re well informed, you can have an enjoyable time buying your home!
Q: What is my first step to buying a home?
Sorry, it’s not looking online for homes you think you could buy. The first step is finding a mortgage lender or a realtor. Realtor’s always have lenders they can introduce you to. It is always best to check out a few to see if they have the right programs or interest rates for you. But don’t go overboard! Although everybody is different, you don’t want your credit pulled so many times.
Talking to a lender to become pre-approved is a must when you start looking for a home. You will learn how much you can borrow, what your interest rate is, and how much you could put down for a down payment. Sometimes a lender will find that you’re unable to be pre-approved. But they can also give you tips and help you on what you can do to become pre-approved and how long that could take.
Q: How long does it take to buy a home?
It depends on if you have a loan and what kind of loan it is, but a common amount of time to close on a home is 30-45 days.
An all cash deal takes less time because you don’t have to worry about an appraisal that is ordered by the lender, underwriting, and other moving parts on the lender’s end.
If it is a hot market during peak season, the timeline could be dragged out a little because many professionals might be busier than during a different time of the year.
Q: How much do I have to pay to work with a real estate agent?
Are you ready for this? Nothing!
Buyers Agents are paid by the sellers. The buyer pays for closing costs, inspection costs, appraisals, and other testing that may be needed.
The buyers agent (and listing agent) actually doesn’t get paid until the property has closed. Yes, even if you have been looking at 100 homes for over a year, your agent doesn’t get a penny until the deal is done.
Q: What about my credit score?
With some loans, credit scores can be as low as 580. There are many programs out there that cater to different types of credit scores. That being said, the higher the score, the less risk the lender sees in the borrower and the lower the interest rate can be.
Q: How much do I need for a down payment?
In the past, 20% was needed for a down payment. That’s not the case anymore. With loans being a little more flexible these days, it’s not uncommon to see a 5% down payment. You do have to keep in mind that with less than 20% down, you will be paying Private Mortgage Insurance (PMI).
There are programs out there where you don’t even need any money for a down payment. FHA loans need as little as 3.5% down. Conventional loans need only as little as 3%. VA loans and USDA loans don’t require any money down. But there are restrictions to these loans. With VA loans you need to be a veteran. With USDA loans there are restrictions on income limits and where the property is located. Talk with a lender about different programs and see which one can be the best fit for you.
Q: What the heck is PMI?
This is Private Mortgage Insurance. With less than 20% down, it will be tacked on to your monthly payments. It ensures your lender that if you were to default, they will still be getting money. It is to protect them if anything like that happens.
Check out nerdwallet’s article about PMI for more information!
Q: What’s earnest money?
This is made in good faith and showing that the offer is serious and genuine. Typically it is 1-2% of the purchase price. It can be more or less, depending on your situation or your advice from your realtor. This money will be part of your down payment, so you don’t have to worry about having to muster up extra cash on top of the money you have set aside already for that payment. Keep in mind, earnest money is money you put on the line. So if for some reason you decide to pull out of the deal and it’s not part of a contingency, you could lose that money.
Q: Should I get an inspection?
The answer every professional in the business will have is YES! Some loans require inspections. It is especially best for foreclosures and homes sold “as is”. Those homes don’t typically have condition reports so you have no idea what is going on with the property. This will give you an idea of what is happening with the home as far as what is wrong, what needs to be repaired, and what you don’t have to worry about.
Keeping your inspection report is a good thing after you buy the house. If you decide to sell, you can show the prospective home buyers what the last report said and you can even tell the buyers what you have fixed since then.
Q: Can I back out of the deal?
Yes, you can. But you don’t want to back out just because you got cold feet. The contingencies in the offer, like the inspection and appraisal contingencies, protect you and give you an out. For example if the inspection report comes back with defects neither party is willing to fix, your agent can send a form back to the other agent and you can get out of the deal and get your earnest money back.
You don’t want to get into a habit of backing out of deals. If you breach the contract or default in any way, you could lose your earnest money. You can’t back out just because you have a change of heart.
Remember to ask your lender if you have any questions about loans, money, interest rates, etc. They will give you the best and most accurate information!
Hartland WI Homes For Sale – Sam Eigner is a real estate agent with EXIT Realty XL in Germantown, WI. I specialize in Hartland, Brookfield, Waukesha and surrounding communities. I love helping buyers and sellers make the right decision for their lifestyle, because everybody has different needs! If you are looking to buy or sell, or have any questions regarding real estate, please don’t hesitate to call or text me directly: 262.825.8648