Buying a home, especially your first home, is extremely exciting and even a little bit intimidating. When I purchased my first home, I had been involved in the real estate industry for several years, so I thought I knew it all. Oh how wrong I was! Luckily, I had a fantastic agent to guide me through the process, and answer all of my questions. Today, I’m going to answer some questions that our agents get asked frequently, and ones I definitely asked myself!
How do I get financing? How long does it take?
Your agent can recommend several mortgage lenders for you to speak with. When you have selected your lender, they will gather important financial information from you. The entire process typically takes 45 to 60 days. The timeline can vary depending on how quickly the lender can get an appraisal of the property, review your financial statements, employment, and credit information.
What is the difference between pre-qualification and pre-approval, and why do you need it?
Pre-qualification is the first step in the home buying and mortgage process, it gives you an idea of what you can afford, and is based on the data you provide to the lender. It is not a hard look into your financial data, therefore, and is not a “sure thing”.
The pre-approval is more involved, with you completing a full mortgage application, and locking in an interest rate. Full documentation is submitted to the lender, and includes an extension credit and financial history check. You will receive in writing a conditional commitment for the exact amount of your mortgage.
While a pre-qualification letter shows that you have spoken to a lender, the pre-approval letter is much stronger, and shows your credit and financial history is strong enough to support you obtaining a mortgage, as long as certain conditions are met (ie the property appraising at or above purchase price, and no changes to your credit or finances). When submitting an offer, your agent may ask for the pre-approval to show the seller that you are a strong candidate!
Why can’t I buy new furniture before I close?
Buying a home is exciting, and many buyers cannot wait to purchase new furniture. Making a large purchase, such as furniture, should happen after the closing. Any changes to your financial situation, ie opening a new credit account, or increasing the balance on a credit card, could greatly effect your ability to obtain a mortgage loan. Before you make any “out of the norm” purchases, make sure you speak to your lender.
What is included in my house payment?
Your house payment will include the principal and interest on your loan. Depending on the terms of your loan, the mortgage payment could also include your homeowner’s insurance, property taxes, mortgage insurance, and homeowners association dues.
Do I need an inspection?
YES! Your agent will recommend that you get a home inspection. A home inspection can spot potential problems and help you make an informed decision about your purchase. It could also save you money in the long run. For example, a buyer was under agreement on property and had a home inspection. The inspection results came back and it turns out the electric panel had been recalled as it was known to cause fires. The buyer was able to negotiate and have the seller replace the panel, saving the buyer money, and from a potential fire down the road. Not all home inspections will result in current or potential problems, however, the peace of mind, and fully understanding the property you are purchasing, is well worth it!
What are closing costs?
Closing costs cover processing and administration of your loan. You may also have to prepay interest charges to cover the partial month in which you close, and deposit money into an escrow account for property taxes, homeowner’s and mortgage insurance. Your lender will be able to give you an estimate of closing costs prior to closing.
Do you have other questions about the home buying process? Reach out to one of our knowledgeable agents by clicking here!