House Buying Questions - 7 Frequently Asked Questions
We thought it might be helpful to create a list of the most frequently asked house buying questions we have received over the years. We are also getting some new inquiries as a result of the current economic crisis we are experiencing. We have provided answers for those questions as well.
So without further ado, here are some of the things people want to know when buying a house for the first time:
1. Can I afford to buy a house?
It certainly makes sense to start with this question before you research anything else! To be more specific, you should be asking: "Can I afford to buy the kind of home I want?" To answer this house buying question you will need to examine your finances.
Take a look at your income and your debt. Determine how much of your gross monthly income is left over each month after you have paid all the bills. You can exclude your rent from this equation, because that monthly expense will go away if / when you buy a house. The amount you have left over is the amount you can leverage to make a mortgage payment each month. This is a good starting point for setting your house buying budget.
Next, you should start to familiarize yourself with mortgage calculators. You can find them online, and most of them are free to use. Using a calculator, you can take the price of a house and break it down into estimated monthly mortgage payments (for a 30-year loan, for example). This will give you a ballpark idea of how much house you can afford.
2. How do I start the process?
This is another common house buying question among first-time buyers. I always tell people to start with thorough review of your financial situation. We touched on the budget factor above, but you should also get copies of your credit reports and scores (you have three of each) to see where you stand. Lenders will use your credit score, your debt-to-income ratio and other factors when deciding whether or not to loan you money.
If you find out that your credit score is low, you're going to have a hard time buying a house -- especially in our current troubled economy. So you should focus your time and energy on rebuilding your credit so that you can qualify for a mortgage in the future. You also need to review your credit reports to make sure they don't contain errors, because this can also hurt your chances of buying a house.
Start here: Fico Scores/Reports
3. What if my credit is bad? How do I improve it?
This is a question many people are asking when trying to buy a house today, and it has to do with the economic crisis we are going through. Mortgage lenders are becoming stricter with their qualification criteria, so you really need to focus on maintaining a good credit score. If you find out that it's low (and you will know if you apply for a loan and get turned down), there is plenty you can do to improve it. This article explains some of the things you can do to boost your score quickly.
4. Which type of mortgage loan should I choose?
This is an important house buying question for many reasons. It's also a question you must answer for yourself. There are many different types of mortgage loans, but most of them can be classified in one of two ways -- they either have a fixed or an adjustable rate. There are also hybrid loans that combine certain qualities of both the fixed-rate and adjustable-rate loan. For more information, refer to this article on choosing a mortgage type that matches your house buying situation.
5. Do I need a real estate agent?
If you are buying a house for the first time, of if you're buying in an area you're unfamiliar with, I recommend hiring a professional real estate agent to help you. You probably have a lot of questions about the house buying process already, which is a perfect example of why you need professional guidance. The real estate terminology alone can be confusing enough. A skilled agent can help you navigate the process and avoid costly mistakes along the way.
6. How can I buy a foreclosure home?
This is a very common question right now, because there are more foreclosure homes on the market than ever before. Last month alone, more than 80,000 homes were foreclosed upon in the United States. When a bank is forced to foreclose on a house because the homeowner stopped making payments, they will try to sell it off as quickly as possible to avoid further losses. They often do this through a real estate auction process.
In most cases, the bidding at an auction will start below the market value of the home. And unless there's a bidding war that drives the price up, the property could be purchased at a great price. This is what attracts people to buying foreclosures in the first place -- it's a way to save money.
With that being said, I am hesitant to recommend it for a first-time buyer. The regular house buying process can be confusing enough for a "newbie." But when you add in foreclosure laws and all the rest, it can become too much for a novice to handle. On top of that, you would need to pay cash in order to buy a house through an auction, and not many people can afford to do that.
7. What happens at the closing process?
The real estate closing (also referred to as settlement) is when the house if officially transferred from the seller to the buyer. You'll be asked to sign a lot of paperwork, and all of the money that has been held in escrow will be distributed -- the seller will get a check for their proceeds, the real estate agent(s) will be paid, etc.
The important thing to understand about a real estate closing process is that there are certain costs involved. You should get an estimate of these costs in advance, when you get approved for a mortgage loan. This is referred to as the "good faith estimate." Just realize that these initial closing cost estimates are usually low, so you plan on paying more than what the lender tells you up front. A day or two before the actual closing date, you should receive a HUD-1 settlement statement that tells you exactly what you'll owe at closing.
Learn More About the House Buying Process
You probably have additional questions about the house buying process, in addition to those listed above. If so, we recommend perusing the following articles on our website:
I hope this tutorial has answered some of your questions about purchasing real estate, and I wish you well on your journey!
Labels: buying
posted by Brandon at
10:49 AM
