Frequently Asked Questions from First Time Home Buyers
If you are considering buying your first home, we know that the process may be a little confusing and overwhelming. For that reason, we put together a list of Frequently Asked Questions that can provide the information to help make the decision a little easier. Here are some common questions amongst first time home buyers:
The end of my lease is coming up, when should I start looking for a house?
If you are currently renting and considering buying a home, it never hurts to start your search as soon as possible. Even if you are a year or so out from seriously starting the process, we encourage buyers to be aware of the market and figure out your likes and dislikes in a home. Here are some questions to consider when beginning your search:
- What is my budget?
- What neighborhood works best for me?
- What are my absolute loves and deal breakers in a house?
- How many bedrooms and bathrooms do I need?
- Do I want a house with a yard or do I want to live maintenance-free?
- If I’m looking to buy a condominium, what is the HOA fee every month?
How do I get started?
There are two places a buyer needs to start when they are ready to purchase a home. The first is to do a little research and find a Realtor® with whom you connect. There are a lot of Realtors® out there so it is important to find someone with whom you feel comfortable and who knows the market and the industry.
The second is to get in touch with a Lender. Before scheduling appointments to tour active properties, it is important to figure out what you can afford. It is especially important to be financially prepared when you are in a competitive market. When making an offer, you will need to submit your contract along with a proof of funds from the bank or a pre-approval letter from your Lender. This shows the seller that you are a serious buyer and have the wherewithal to afford the house. It is safe to say that an offer will not even be considered or presented without a pre-approval letter from your Lender.
And just remember, when you’re ready to make an offer, we have the best group of Realtors® in Richmond. Reach out to get connected with one of our incredible Sales Associates who will be there to guide you every step of the way!
Why is it important for me to use a Realtor® instead of buying on my own?
Realtors® are essentially licensed guides and matchmakers in the home buying process. We are here to help find and secure the perfect house for our clients.
While buyers have online resources like Zillow and Trulia to help find a house, Realtors® have access to a database called CVRMLS. This database provides us with all the tools, statistics, and search criteria you need to find a home within your budget and wish list.
Additionally, Realtors® have Sentrilock and ShowingTime access, both of which allow for ease of touring a house. ShowingTime is a scheduling service where your Realtor® can select an available time to go see the house. Once you pick the time, the seller and Listing Agent are both notified, that way they know to not be on the property when a potential buyer is coming by. Sentrilock allows the agent to get the key from a secure lockbox. Both services save time and eliminate a lot of hassle for both buyer and seller.
Last but not least, as registered members of the Richmond Association of Realtors®, we have access to contract and addendum templates that you would otherwise need legal assistance from a lawyer to ensure its validity.
What is a good credit score that will allow me to qualify for a loan?
Knowing your credit score can help expedite the purchasing process and gives you more buying power. If you don’t know your credit score, we recommend talking to one of our preferred Lenders to get the most accurate number. For conventional loans, you’ll need a credit score of at least 620, but with FHA, VA, or USDA loans, you may be able to qualify with a lower score. To qualify for the best interest rates on a mortgage, you will want to aim for a score of at least 740.
The better your credit history, the more likely you are to receive a good interest rate on your loan. If there are errors on your credit report, you may have trouble qualifying for a loan. If you need help building your credit score, most Lenders have recommendations and programs that can help with that process.
How much should I save for a down payment?
Many buyers are under the impression that you need to have at least 20% saved for a down payment, but that’s not exactly true.
When determining how much to save for a down payment, saving as close to 20% of the home’s purchase price is ideal. You will pay less in interest and fees, you won’t have to pay mortgage insurance (or PMI), and you will start out with more equity in your pocket. But many homebuyers, especially first-time buyers, make down payments of less than 20%.
In most cases, you need a down payment of at least 3% of your target home price and many loans and Lenders require at least 5% down. You can often save money if you put down at least 10% of the home price and you’ll save the most if you put down at least 20%.
For those that need more financial assistance, you may qualify for FHA or USDA loans where you can be eligible for a 0% down payment. Veterans automatically qualify for VA loans where they do not have mortgage insurance as a part of their monthly payment, nor are they required to make a down payment.
We are happy and ready to put you in touch with one of our preferred Lenders. They will answer all your questions and get you qualified/approved for the right loan.
What is the difference between pre-qualification and pre-approval?
Getting pre-qualified shows that a Lender has decided you will likely be approved for a loan up to a certain amount, based on your current financial situation. To get pre-qualified, you simply tell a Lender your level of income, assets, and debt. The Lender will then take that unverified information and determine how much you will likely be approved for. But remember, there are no guarantees you will be approved for that initial figure.
Being pre-approved means you’ve been officially approved by a Lender for a specific loan amount. Once you have been pre-approved, you will receive a letter that states your loan amount. Unlike getting pre-qualified, when getting pre-approved, you provide documented financial information (pay stubs, statements, obligations, credit report, etc.) to be reviewed and verified by the Lender.
The best thing to do is to go ahead and get pre-approved so you can make an offer on your dream home and have the statement of finances to back up your offer. Not only is this in your best interest, but it also gives the seller the knowledge and security to move forward with your offer.
I don’t want to miss homes that are available that meet my likes and criteria. What’s the easiest way to stay on top of the active housing market?
The best way to find homes that meet your wish list is to tell your Realtor® what you’re looking for and let them take care of the rest. Our Sales Associates not only have MLS access, but we have our own database, theRVAlife.com, which allows us to set up specific searches that include your criteria. In both cases, these searches are alerted when new properties hit the market, which are then sent directly to your email. If you choose to use theRVAlife.com for alerts, we encourage our clients to download our app which can send notifications right to your phone. If you see a house you love, be sure to get in touch with your Realtor® quickly to let them know you are interested!
Should I bring anyone to showings or inspections?
Yes, while it’s okay to bring someone with you to showings and inspections, we would advise against bringing too many people. We know it’s tempting for first-time home buyers to want a lot of input when it comes to a big decision like buying a house, but sometimes listening to too many opinions is overwhelming and can ultimately drown out your own gut feeling and potential love and vision for a home.
When it comes to home inspections, ultimately what happens is the inspector will go through every nook and cranny of the house to make sure everything looks right and is in proper working order. This includes everything from inspecting the roof, foundation, and chimney, to checking appliances, to making sure plants aren’t growing too close to the house, etc.
Once the inspection is complete, the inspector will go over all the details with you and highlight what looks good and his/her potential concerns and recommendations for work to be done. This is communicated both verbally and in a written report which is sent to you and your agent. If you have any questions about the home, you can ask your agent or the inspector while the two of you are on the premises.
And again, you can bring someone with you to the inspection if you feel it is beneficial or you simply want to show someone the home. But just remember, above all else, it is important to ask questions when you are unsure about something and to go with what you feel is the right thing to do.
Should the house be in perfect or near-perfect condition before I submit an offer?
The short answer is “no”, but really, this comes down to personal preference. It is hard to know if a house is in perfect or near-perfect condition until after the inspector has done his/her job or unless it is brand new construction. If the house you are looking to buy is older, and you are okay with the fact that it may have some work to be done, don’t be afraid to submit an offer!
How long is the homebuying process from start to finish?
This can vary, but generally it takes 30-45 days to close once you have a signed contract from both parties.
I always have the option to lease an apartment or a house, so why should I buy?
There are quite a few answers to this question, but the number one reason is… buying a house is one of the best investments you can make. In other words, by investing in Real Estate you are building your personal equity and general wealth. Leasing is always an option, but don’t forget, when you rent an apartment or house, you are contributing to someone else’s financial future instead of your own.
I go back and forth about buying. . . how do I know if I am ready?
Only YOU know if you are truly ready! If you are in a good spot with your finances and want to make an investment, then you may be ready to purchase your first home. And whether you have done your own research, or need some guidance from a licensed Realtor®, just remember… it’s never too early to start looking into your options with Real Estate.