Top 20 First Time Home Buyer Questions

First Time Home Buyer questions

Buying your first home can be very stressful and there are many things first time home buyers need to know and often ask during the process. We put together the top 20 first time home buyer questions and provided answers to them all. Hopefully the answers to some of your questions can be found below.

Is there help to cover closing costs?

First time home buyers are expected to pay for their closing costs. However, in some instances you can roll your closing costs into the loan. With FHA loans for example, sellers are permitted to cover your closing costs up to 6% of the purchase price. You can also get a gift from a relative to help with your closing costs.

How do I determine how much I can afford?

The amount of home you can afford as a first time home buyer will be based upon your income, any debt on your credit report, plus the proposed mortgage payment.

We recommend you try our home affordability calculator to see how much you can afford to buy. Then, we can help you to get pre-approved.

How can I get pre-approved for a first time home buyer program?

The only way to get pre-approved for a first time home buyer loan is to speak to one of our helpful lenders. All you will need is for them to evaluate your credit, a recent pay stub, and a recent bank statement. Read our article on how to get pre-approved or simply complete this pre approval form.

What if my co-borrower is not a first time home buyer?

If you have a co-borrower, he or she does not have to be a first time home buyer. You can still get approved as a first time home buyer even if your co-borrower owns a home now.

Can a first time home buyer with a bankruptcy buy a home?

You can purchase a home as a first time home buyer despite having a recent bankruptcy. However, you may not qualify for an FHA or conventional mortgage. With a chapter 7 bankruptcy that is less than two years from the discharge date, your down payment will likely be 20-25% and the interest rate will be higher. Read our article on purchasing a home with a bankruptcy.

Do first time home buyer grants have to be repaid?

First time home buyer grants typically do not have to be repaid because a grant is a gift. You will need to meet the qualifications and requirements to receive the grant which could include a minimum credit score or maximum level of income. Read our article on down payment assistance programs.

Do first time home buyers need homeowner’s insurance?

All lenders will require the homeowner to carry a homeowner’s insurance policy for a home where there is a mortgage. You will need to show proof of insurance coverage before the loan closes. The only exception would be a condo for example if the condo association has its own policy that protects the property in the event of a disaster.

What is PMI and how much is it?

PMI is “private mortgage insurance” which is an insurance policy protecting the lender from borrower default. It is a requirement for most mortgages where the down payment is less than 20%. The amount is typically .5%-1% of the loan amount and is included in your monthly mortgage payments. The amount is also partially determined by how much you put down when you purchase the home. Read [FHA Mortgage Insurance]

What are points and should I pay them?

Points, or “discount points” are a premium paid as part of your closing costs to lower the rate offered by the lender. One point is equal to 1% of the loan amount. When you pay a point, you should also be offered a lower rate than if you paid no points.

The decision to pay points should be based upon how much you will save each month under the lower rate and how long you plan to own the home.

How can I get pre-approved?

To get pre-approved for a mortgage, you will need to complete an application a lender. They will need to see your last 30 days pay stubs, your 2 most recent bank statement, last two years take returns, and they will have to pull your credit report.

Next, the loan officer will hopefully get an automated approval pending conditions. It is at this time when the lender can write your pre-approval letter.

How long does it take to get financing and close on a house? 

Bill Gassett from Maximum Real Estate Exposure says “Home buyers can expect that getting a mortgage can take in a range of 3-5 weeks. There will be a bit of variation depending on the type of loan and the area of the country you’re located in due to sales volume.”

Another factor which first time home buyers control is how quickly they complete the mortgage application and provide ALL of the necessary documents required by the lender. Your loan application cannot be submitted to underwriting until every document has been received.

How much can I get qualified for?

When applying for a mortgage, the amount you can qualify for will be tied to the maximum debt to income ratio allowed under the mortgage program you are applying for.

Brian Davis from Spark Rental says “Home buyers should ask What’s the least I can spend on housing and still be happy. When you frame the question based upon your upper limit rather than your lower limit, you look at homes at the upper edge of your range which is a recipe for overspending on housing.

How much will property taxes cost?

Property taxes are determined by the tax rate set by each municipality or town as a percentage of the assessed value of the home. This is why some towns have higher taxes than other towns. The town can increase or decrease taxes by adjusting the tax rate or the assessed value of the home.

The national average tax rate is anywhere from 1%-1.25% of the assessed value of the home. There are some high cost areas where the tax rate is much higher. As a first time home buyer, the property taxes in the area where you are searching will have a direct impact on how much home you can afford.

How much are closing costs?

Closing costs for the purchase of your first home will range anywhere from 2%-4% of the loan amount depending upon the type of loan, size of the loan, and other factors. For a full breakdown of what your closing costs could be, read our article on FHA closing costs where we break down all of the potential closing costs.

What are the other costs of owning a home?

While many first time home buyers look to buy a home vs rent, there are other costs to owning a home that renters may or may not experience. The additional costs over and above your mortgage payment include the following:

  • Increases in property taxes
  • Homeowner’s insurance
  • Homeowner’ association fees
  • Utilities (electric, water, gas)
  • Repairs
  • Yard maintenance
  • Closing costs on the purchase

You can see there is more to home ownership than just paying the mortgage. It takes careful consideration before taking the leap from renting to buying a home.

Are there zero down programs for first time home buyers?

There are mortgage programs that have a zero down payment requirement but they are not just for first time home buyers.  VA loans for veterans and active military have no down payment requirement. USDA loans for home located in rural areas also have no down payment requirement.

There is also a way to get an FHA loan without having to pay for the down payment out of pocket. To learn more about this, read our article on zero down FHA loans.

Are there income limits for first time home buyers?

There are no income limits or maximum income amount for any mortgage program for first time home buyers. However, some of the down payment assistance programs or grants do have income limits to qualify for those programs.

Are there first time home buyer programs with bad credit?

The mortgage program which allows for bad credit is the FHA loan. The guidelines allow for credit scores as low as 500. However, not all lenders accept scores that low. There are also a few lenders who will help veterans with bad credit to get a VA loan.

Should I use a real estate agent?

If you are purchasing a home, it makes sense to use a real estate agent. There is no cost to you as a buyer and the agent will help by providing you with lots of local knowledge about the area where you plan to make your purchase.

It is important to find an agent who you can connect with and who understands what you are looking for. If you need help finding a local real estate agent, then complete this find a real estate agent form.

When is the right time to buy a home?

The right time to buy a home will vary for each person because it depends on why you are purchasing the home. If it is purely for investment purchases, then it may not make sense to buy at the height of the market. However, if you are buying the home to live in for many years, then market conditions should not play a role in your decision. Simply purchase the right home to suit your needs.

Other Helpful Articles

First Time Home Buyer Programs

Common First Time Home Buyer Questions Per HUD

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