Let’s start by identifying and answering the 5 most common questions first time buyers have when looking to buy a home.
1. What is my Price Range?
To determine your price range, sit down and compare your monthly income to your monthly expenses (savings, credit card payments, car payment, quality of life, etc.). Then it is best to talk to a mortgage professional, such as myself, to find out what you can afford based on your debt to income ratio and taking into account what a mortgage costs including taxes, insurance, etc.
2. Do I need a real estate agent?
Here’s the short answer … yes!
Buying a home is one of the biggest financial transactions you will ever make, so it’s always wise to have professional help. In most cases, the seller pays the commissions so it makes sense because you get the help for free!
Your agent will help you find homes that match your price range and desired features. He or she will also help you validate the asking price (next item), write up the purchase offer, help you negotiate with the seller, and guide you through the rest of the home buying process.
3. How do I research the asking price?
The first thing to realize here is that it’s called an “asking price” for a reason. The price set by the seller is never set in stone. Your real estate agent will help you validate the asking price by looking at comparable, recent sales in the area. This will tell you if the asking price is reasonable or over-priced, based on current marketing conditions.
4. Which type of mortgage loan should I choose?
First, do some research on the basic types of home loans — fixed rate, adjustable rate (ARM), balloon loan, etc. When researching the different mortgage types, pay attention to paragraphs that begin with: “This type of mortgage might be best for you if…” Generally, this type of statement is followed by a series of pros and cons that will explain the type of home buyer who might choose that option.
As a rule of thumb, if you’re going to be in the home for quite a while (five years or more), it’s probably a good idea to choose a fixed-rate mortgage.
On the other hand, if you think you’ll only be in the home for two or three years, you might want to choose an adjustable-rate mortgage to save money during your short time of ownership.
5. What happens at the real estate closing?
Basically, the real estate closing (also known as a “settlement”) is when property ownership transfers from the seller to the buyer. All remaining fees associated with the transaction will be paid as well, and these are known as closing costs. The seller gets their portion of the payment (minus what they still owe on the mortgage), and the deed is transferred to reflect the new owner.
As a home buyer, the best you can do is save more money than you think you’ll need at closing, just to be safe. You should also make sure you receive a HUD-1 statement (or “settlement statement”) at least one day prior to the closing date. This document gives you an itemized list of the costs you’ll be expected to pay at closing. The Real Estate Settlement Procedures Act (RESPA) requires that the closing / escrow agent provide this document to you at least one day before the real estate closing.
If you work with me I go over with you over the phone with you before we meet for the signing so there are no issues at the final signing of your loan docs.
Buying a home can be a confusing process, and in today’s ever changing real estate market it’s more important than ever to have a competent lending team on your side. If you are looking to purchase a home in the Sacramento Area, know that the my team has more than 40 years’ experience and is here to help you navigate through the transaction.