4 Common Questions I get from Buyers
Thinking of buying your first home? Congrats! It's an exciting – albeit daunting – experience. There are a lot of unknowns and plenty of questions you may have about homeownership. We understand the anxiety that can come with committing to such a large purchase, but we're here to help make this process as easy as possible for you. In this blog post, we will be unpacking the mystery surrounding what it takes to become a homeowner and answering all those common questions first-time home-buyers have along their journey. Whether you're just beginning your research or well on your way through the process, we’ll give you the lowdown on what you need to know!
1. How much home can I actually afford?
This is one of the most important questions to consider before beginning the home buying process. First, it's important for buyers to have a clear understanding of the total cost of the property so they can budget and plan accordingly. The cost of a property can be broken down into several different components, including the purchase price, closing costs, property taxes, insurance, and HOA fees. There are many online calculators available to help you get an idea of your budget on your own, but getting Pre-Approved is by far the best way to determine your exact budget. Loan officers and other mortgage specialists will factor in other financial obligations (like student loans or car payments) and even your lifestyle to give you the most accurate figures, and ensure that you will not be financially burdened by this purchase.
2. What type of loan is best for me?
There are a lot of different loan options out there, so it can be tough to know which one to go for. There is no one-size-fits-all when it comes to selecting a loan, so it’s important to choose the one that best satisfies your needs, both now and in the future. Most people ultimately choose their loan based how much money they will need to put down, and their ability to make the monthly mortgage payments. For instance, VA and USDA loans require no money to be put down, while FHA and Conventional loans require anywhere from 3.5% to 20% down (LINKKKKK). Each loan type offers different interest rates, terms and down payment requirements, so it’s important to research and compare the different types of mortgages to figure out which one will best suit your current financial situation and long-term goals. This is where enlisting the help of a mortgage professional can really be beneficial. They will walk you through each loan type and can even run the numbers to give you a wholistic view of the loan that best fits you.
3. What is Escrow?
When you talk about real estate with family or friends, you probably hear the word “escrow” get thrown around a lot, and wonder what that actually means. Since escrow is such a huge part of every real estate transaction, it’s important for you to have a good grasp of what it entails. Think of escrow as a neutral third party that just oversees the transaction and ensures that both buyer and seller fulfill their obligations throughout the process. Once escrow is opened, meaning once buyer and seller have agreed to work together on a particular sale, you will be given a timeline that neatly lays out all the important things that need to happen before you move in. This would include cleaning the home, double checking your finances to make sure you still qualify to purchase the home, and conducting various inspections. The entire process takes roughly 45 days on average to be completed, however you could adjust the timeframe depending on your circumstances.
4. How do I know if the home is in a good condition?
Sure, a house might look nice on the outside, but how can you truly tell if the home is in good condition? After all, there could potentially be a lot of underlying problems that might cost you thousands to repair. Fortunately, once you enter escrow, one of the first items on the to-do list is to get the property inspected. A professional home inspector will go through the entire property inside and out, checking appliances, windows, faucets, roofs and everything in between to evaluate its condition. This is one of the most important junctures during the escrow process where you could actually cancel the transaction and get all your money back if the inspection is not to your liking. On the flip side, if the inspection is good, but there are minor issues here and there, you have the ability to negotiate and request that the sellers repair some of those items before you move in.
Purchasing a home can be both an exciting and daunting task all at the same time. Therefore, it's incredibly important to arm yourself with as much knowledge as possible before making any decisions. Hopefully this blog has answered some of your initial questions about homeownership, as well as what you need to consider financially and physically before doing so. It is wise to work with a reliable real estate agent who specializes in the area that you are looking to buy in, as they will have the most up-to-date information on market conditions, pricing trends, etc. Last but not least, ensure you involve a qualified mortgage professional who will help you figure out where you stand financially. Need help getting started? Contact any of us at Team Wong Hawaii, we would love to help!