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Author: Ryan Ginther
Owner/Agent & Loan Officer NMLS #1147279

1/10/2021

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first time homeowner faqs

Buying a home can be a confusing time, especially if it's your first! The last thing you want is to think of questions after it is too late! Below are just about all the most common questions new buyers have before and during the process.

There are many other questions answered about the general process on our 7-Step Home Buying Process page. We highly recommend starting there ^ or going there next!

  • We highly recommend speaking with a solid lender, the sooner, the better. They will be able to tell you what you qualify for based on your income history

  • Try to follow the "28% Rule". This is the common idea that your mortgage payment should not exceed 28% of your household gross monthly income

  • A lender can determine how much you will need for a down payment along with other fees

  • A lender can provide you with a pre-approval letter you will need to purchase a home

How much house can I afford?

What does my credit score need to be?

  • The lowest a credit score can be is 580. Anything under 620 can be problematic and difficult to get approved

  • FHA & USDA loans are typically best for 580-680 scores

  • Conventional loans are typically best for 680-800+ scores

  • You cannot have any late payments on revolving debt (credit cards) for a minimum of 6 months

  • You cannot have any late payments on loan payments for a minimum of 6 months

  • Established credit (2+ years of on-time payments) is sometimes required

  • If you have a co-borrower, the credit score that is used is the lesser middle score of the 2 borrowers

Do I have to have 20% down?

  • No! This is a widespread misconception. Ideally, 20% is more beneficial long-term to avoid PMI that you will be paying monthly on top of your principal, interest, taxes, and insurance (PITI)

  • There are government programs that cover your down payment (MHDC & USDA for rural properties)

  • In most cases, you will need 3.5% down for an FHA loan and 5% down for a Conventional loan

  • VA loans do not require a down payment!

What if I don't have a down payment?

  • Good news! There are options. With certain loan programs, you can borrow some, if not ALL, of the down payment required from a family member. You could still have other fees in closing costs, appraisal fees, inspection fees, etc.

  • Gift funds need to be sourced (gifter will have to provide bank statements)

  • Not recommended unless you still have money in savings ^^

What out of pocket fees are there?

  • A minimum Down Payment is required most of the time (can range from 0%-5%)

  • Closing Costs (partial taxes, insurance, lender fees, & title fees = 2-3% of the loan amount on average)

  • *Closings costs can be covered by the seller! ^^

  • Appraisal Fee (typically $450-$500) (Waived for VA loans & sometimes with 20%+ down loans)

  • Inspection Fees (typically $300-$800)

  • Moving Costs if you higher movers ($700-$2,000)

What is PMI? (Private Mortgage Insurance)

  • It is a monthly fee charged by the lender if you put less than 20% down (a risk fee of sorts)

  • In a nutshell, it is a fee charged to beef up banks insurance accounts to soften shortfalls of foreclosures

  • PMI is removed by either hitting 78% loan-to-value via payments, refinancing, or by performing an appraisal showing you have 80% equity (lender specific)

  • All loan types can have a form of mortgage insurance with the exception of VA loans

What other costs of owning should I budget for?

  • Always have backup savings accounts for repairs! (6 months mortgage payment is ideal)

  • Factor an electric bill, gas bill, water bill, internet bill, TV bill, trash bill, & HOA dues

  • Budget for major expenses discovered during inspections (old HVAC, roof, exterior paint, etc.)

  • Always add 20% to updating plans! Things ALWAYS cost more than expected

  • Factor future purchases such as a new mower, car, appliances, etc.

  • Factor and research how much kids could cost you if you're a growing family

Will the bank give me money to make updates?

  • Yes, but it is challenging to pull off

  • An FHA 203k loan is the most common, but you have to line out a general contractor, have the bids approved by the lender, and then the title company releases the money as the work is completed

  • In a competitive market, the average days on the market typically do not allow for enough time to get your ducks in a row

Can I get out of my current lease early?

  • Yes, but it may come at a price

  • Often times landlords will let you out early if they can find a renter, or you give 60 days heads up

  • In some cases, they may make you pay out the remainder of your lease (always check!)

How long do big items last?

  • Roof (15-25 years)

  • HVAC System (Heat Pump 15-30 years - AC Condenser 10-15 years)

  • Water Heater (6-13 years)

  • Exterior Paint (5-8 years)

  • Vinyl Windows (20-40 years)

  • Kitchen Appliances, Washers, & Dryers (10+ years)

  • *Watch for builder grade components! They typically do not last as long

Where do You Want to Go Next?

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Can I Just Look at Homes Already!?

I feel ready and I am done reading about how I can save money and stuff.

Take Me to the Homes! >
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