Top 5 Questions I Get Asked By Buyer Clients
“How Do I Know When I’m Ready to Buy a Home?”
For us, we were living in a small apartment, paying someone else’s mortgage and we both had 2 consistent jobs. We knew we wanted to have a yard and a dog (obviously very important :), so that’s how we started our interest & search.
I feel that there are 3 check boxes, if you will, before being a serious buyer:
- Employment – are you in a place where you’re at a job that you see yourself being at for the next year or two? It’s important to have consistent income coming in in order to qualify for a mortgage. This means you either get a W-2 as an hourly or salary employee, or you have 2 years of consistent income as a self-employed individual.
- Savings – how is your piggy bank looking? Typically, even if you’re planning on having your down payment be a gift, it’s always a good idea to have saved at least 5% of your potential purchase price in order to cover inspection & appraisal costs, closing costs, & any unforeseen moving and/or first year house costs!
- Settling Down – as funny as this sounds, buying a house is a big step, whether it’s just you or with a significant other! Make sure that you’re ready to assume the costs with owning a home & are ok with taking on this responsibility! If you’re not 100% sure that you want to live in this area for more than 2 years or that your job won’t take you somewhere else, consider holding off!
“How Long Does It Take to Buy a Home?”
Timelines are all different, and I get this question A LOT, especially from my renters who are planning on buying when their lease is up. Typically, I’ll tell my renters to start working with me about 9 months – 1 year out. That may seem like a crazy long process, but it gives you time to get pre-approved, make changes to your income/ credit if necessary, & start familiarizing yourself with me & the current market!
“What’s a Typical Down Payment Amount? I Heard If You Don’t Put 20% Down, You End Up Paying More.”
This is a big question that can be confusing for first time home buyers. The real estate industry has gotten away from requiring 20% down as a down payment because it’s really hard for younger people to save that chunk of money with student loans, higher living expenses, & other monthly payments. Most first, and even second time home buyers will put down anywhere from 3-10%, varying by situation.
‘The catch’ that everyone refers to when you don’t put 20% down is called Private Mortgage Insurance, or “PMI”. This is tacked onto your monthly payment when you put less than 20% down because, in the eyes of the bank, you’re more of a risk.
However, once your monthly payments add up to that 20% down payment #, this PMI goes away, and your monthly payment actually decreases!
“If I’m Switching Jobs, Should I Wait to Get Pre-Approved?”
It depends! Getting pre-approved is a great way to determine a good budget. If the new job is going to be a lateral or positive move in income, there’s no harm in being pre-approved at present and having your lender update your pre-approval once you’ve had 2 months of income.
If the new job is going to result in a decrease in income, or is a switch from hourly or salaried income to self-employment, it may be a good idea to either wait until your income is consistent & strong, OR, if possible, purchase your home before making the switch to avoid a 1-2+ year delay in purchasing a home.
Changing employment happens! If purchasing a home is your number one priority, consider waiting to change jobs until after closing. If it makes sense to change jobs ASAP, you know what is best for you. Just communicate with your lender & realtor to determine the best timeline!
“Besides Down Payment, What Other Costs Are There?”
Inspections: $350 – $800 – depending on the amount of speciality inspections that are necessary
Appraisal: $300 – $400
Lender Fees: 0.5% – 1% of the loan value (*not purchase price)
Moving Costs: ~ $1,000
Pre-Paids & Closing Costs: 2.5% of purchase price (these can be decreased if given a credit to cover partial or full closing costs
Unexpected Costs: $5,000 – it’s always a good idea to have a piggy bank for any issues that may come up post-closing!
While I get questions like these daily, I hope I was able to answer some of your home-buying questions! If you have others, feel free to leave a comment & I’ll answer in an upcoming blog post.
Want to get in touch? Head over to the ‘Contact Me’ page on my website to set up a buyer’s consult with me to get started!