In my years as a real estate broker, I’ve been asked a number of the same questions by individuals looking to purchase their first home. For your convenience, I’ve included some of the most frequent questions here, with short answers. But give me a call if you want a more in-depth explanations or don’t see your question on this list!
Q: I’m interested in buying a house, but I’m not sure “how much” house to buy? Do you have any tips?
There are really two aspects to that question: what type of home should you buy, and how much can you afford comfortably. The two parts work hand-in-hand. Start by making a list of your minimum requirements for a home, and then add amenities that you would like, but aren’t essential. Consider the living space, storage, the community itself, school district, distance from job, public and transportation. Along with the mortgage banker, I help my clients through the process of deciding what they can afford so they won’t become “house poor.”
Q: I’ve heard the saying that the three most important aspects of a property are location, location, and location. So what makes a good location?
For many people, they know the right location when they see it. Do you like the urban environment or the rural? How far away is shopping for necessities? How close do you need to be to family and friends? How is the school district? Does the area have a low incidence of crime? If you find an area that interests you, talk to the people who live there. They can be your best source of information. I assist all my clients with picking a location that suits them best.
Q: I’m interested in getting information about local schools. How do I do that?
The school systems often provide great information on their websites that give pertinent information about facilities that serve K-12 students. The websites can give class sizes, academics, calendar of events, proficiency results in English, math and other subjects, as well as sports and extracurricular activities.
Q: What will my mortgage cover?
Most loans have 4 parts: principal, interest payment to the lender, homeowners insurance, and an escrow account for property taxes. All of these components either pay off your obligation to the lender or protect the lender’s -- and your -- investment. Most mortgages are written for 30 years, but some homebuyers elect to go with 15-year mortgages to build their equity faster and cut interest costs.
Q: In addition to mortgage payments, are there other costs I should consider when I buy a house?
You should budget the monthly cost of electricity, water, natural gas or propane, sewerage, trash collection, internet and cable TV and land-line telephone, where it applies. Many of these charges may be new to you if you have been renting because they were captured through your rent payments. You should also think about the cost of lawn and snowplowing service if you don’t intend to do this work yourself. You may also have homeowner association or condo association dues.
Q: How much will my property taxes be and are there other tax issues I should consider?
The research report that I provide to my clients free of charge gives good approximations of the property taxes. It’s worth keeping in mind that your mortgage interest and real estate taxes often are deductible under federal income taxes, but also consider the possibility that your property taxes may rise over time.
Q: When I buy a home, who pays the broker fees?
Unless otherwise specified, the broker fees are paid by the seller. This is good news for buyers because the transaction of transferring ownership of a house is a fairly detailed process with a lot of moving parts. I do customized reports that help buyers figure out potential areas and housing stock within their price ranges and suggest ways to structure deals to save my clients money. Further, you will be required to use a real estate broker to submit your bid for a HUD home.
Q: I’ve found a home that I am interested in. What should I be looking for?
Congratulations for reaching this stage! Now’s the time to keep your excitement in check while you examine at the home’s features from an impartial basis. Consider the number of bedrooms and bathrooms with an eye to how they will serve your need present and future needs. Take a close look at the floor plan and kitchen use. Consider the age of the mechanical systems and appliances that remain with the house. Determine how your furniture will fit in the house and whether there is enough storage space. Take a realistic look at the potential replacement of carpeting, flooring and roof.
Q: How many homes should I look at before I pick one?
The U.S. Department of Housing and Urban Development reports that individuals usually look at 15 homes on average before selecting one to buy. While that is an interesting statistic, every one of my clients has unique requirements, and my goal is customer satisfaction. I’ve had some clients that find the right home after seeing less than 6 houses, and I’ve had other clients that have viewed more than 25 before buying their dream home. I consider my job done when my client is happy, and I’ll work with them as long as it takes to make that happen.
Q: How much money will I have to come up with to buy a home?
As a rule of thumb, a home buyer has to cover three costs: earnest money, the down payment on the property, and closing costs. If you submit an offer on a house, you normally place a deposit down as earnest money to show good faith to the seller. This money goes into an escrow account. The down payment on the house is generally set by your lender, anywhere from 3% to 20% of the purchase price. Closing costs are paid at the settlement of the transaction. These costs cover various fees your lender charges and other processing expenses. Your lender will give you an estimate of your closing costs.
Q: What happens at the closing?
In general, there will be a meeting with you, your broker, the seller, the seller’s broker and the closing agent. Before you go to closing, your lender is required to give you information that will explain the closing costs, a list of documents required at closing, and a "good faith estimate" of how much cash you will need to close. It’s important to read this information before you attend the closing and ask questions so that you understand the process. You and the seller will be asked to review and sign a number of documents that transfer ownership of the property based on the terms of sale. These are binding contracts, so it is vital that you read each document and consult with your broker if you have any questions.
For more information, the U.S. Department of Housing and Urban Development has a longer list of questions and answers at this address: Q and A.