BUYER Frequently Asked Questions

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The traditional down payment is 20% of the home’s price, but many first-time buyers can qualify for loans with lower down payments, such as FHA loans requiring as little as 3.5%. Some conventional loans may even allow down payments as low as 3%, depending on your financial situation and credit score.

A good rule of thumb is to spend no more than 25%-30% of your gross monthly income on your mortgage payment, including taxes and insurance. It’s important to get pre-approved for a loan, which will give you a clear idea of your budget based on your financial profile and credit history.

Closing costs are fees paid at the end of the home buying process and typically range from 2% to 5% of the home’s purchase price. They include expenses like loan origination fees, title insurance, appraisal fees, and taxes. Buyers should plan to have funds set aside for these costs in addition to the down payment.

Pre-qualification is a basic estimate of how much you can borrow based on self-reported information, while pre-approval involves a more in-depth look at your financial situation, including a credit check. Pre-approval carries more weight and shows sellers that you’re a serious buyer.

The right mortgage depends on your financial situation, credit score, and long-term plans. Common options include fixed-rate mortgages, where the interest rate stays the same, and adjustable-rate mortgages (ARMs), where the rate may change over time. First-time buyers often benefit from FHA or VA loans if eligible, which offer lower down payments and flexible requirements.

A home inspection is a critical step to ensure the property is in good condition. Inspectors will check the roof, foundation, plumbing, electrical systems, HVAC, and more. First-time buyers should attend the inspection and ask questions to understand any issues that might need attention before purchasing.

A good credit score can help you secure better loan terms, but you don’t need perfect credit to buy a home. Most lenders require a minimum credit score of 620 for conventional loans. However, FHA loans may accept scores as low as 580, and other programs may have more flexible requirements based on income and other factors.

Earnest money is a deposit made to show the seller you're serious about buying the home. It’s typically around 1% of the home’s purchase price and is applied toward your down payment or closing costs if the deal goes through. If you back out of the sale for a reason not covered by your contract (especially after your option period has ended), you might forfeit this money, so it’s important to understand the contract terms.

Option money is a non-refundable fee paid by a buyer to the seller in a real estate transaction, giving the buyer the right to terminate the contract for any reason during the option period, typically ranging from 5 to 10 days. This option period allows the buyer to conduct inspections and due diligence without the risk of losing the home or their earnest money if they choose to back out. If the sale goes through, the option money is usually credited toward the purchase price, but if the buyer terminates the contract, the seller keeps the option money.

Private Mortgage Insurance (PMI) is required if you put down less than 20% on a conventional loan. It protects the lender in case you default on the loan. PMI typically adds 0.3% to 1.5% of the loan amount to your annual mortgage costs, but it can be removed once you've built up enough equity in your home, usually when you reach 20% equity.

From start to finish, the home buying process can take anywhere from 30 to 90 days, depending on factors like finding the right home, negotiating the purchase, securing financing, and completing inspections. The timeline can vary, but having pre-approval and a clear understanding of your budget can speed up the process. If you are a cash buyer you can often close in 2 weeks or less, depending on how quickly the title company can issue your title policy.

The neighborhood is crucial when buying a home, as it impacts property values, safety, and your overall living experience. Research schools, amenities, commuting options, and future development plans in the area. Even if you love the house, the neighborhood should also meet your long-term needs and lifestyle.

As a homeowner, you’ll be responsible for maintaining and repairing your property. A common rule is to set aside 1% to 3% of your home’s purchase price annually for maintenance. For example, if your home costs $300,000, you should budget $3,000 to $9,000 each year for repairs and upkeep.