The questions that a first-time home-buyer should ask and understand before starting the process are actually one of the most important parts of getting a mortgage loan. No question is too dumb and all questions are good question if you do not know the answers. Here are eight common questions with answers:
1. Am I ready to buy a home?
If you’ve had a stable job for a couple of years and you like the area you live in, and do not think you will want to move for at least five years, then purchasing a home might be a good idea. You also need to be ready for the additional responsibilities such as yard care, fixing broken appliances, and other maintenance needs. Homes will not keep their value if these aren’t kept up.
When you think you are ready to buy a house, it is important to consider what your credit rating is like, and what your debt to income ratio is. This will depend upon how much you can borrow. If you have a lot of debt, it is time to get it paid down. You want a couple of years of one-time payments, with no late payments for at least two years.
- What is better or worse about buying over renting?
When you rent, your entire payment is just gone. But when you purchase you are building equity in your home and you will get either more than you have paid into the house back, or you’ll get something back when you sell the house. When you rent, you will get nothing but perhaps your deposit back, if you’re lucky. However, as a house owner you will have the responsibility of upkeep on the dwelling, which is a normal cost.
- How do I find a mortgage broker or a mortgage lender?
*note – Most of the larger banks have a mortgage department which deals only with mortgage lending. They are specialized in making mortgage loans. Smaller banks do not always fund loans, they take the application and send the loan to be approved by a larger institution who will fund the loan.
First of all a mortgage broker and a mortgage lender are two very different kinds of structures. A mortgage lender is either a bank or a mortgage company who is the institution who lends the money when the loan is approved. A mortgage broker does not lend the money to you. They take the application; send it to a lending institution for final approve and then funding of the loan. Only a few brokers are eligible to fund the loan themselves, therefore they are acting as an in between party for the approved lending institution such as a bank or direct mortgage company.
The best way to find a mortgage broker or mortgage lender is to search online for reviews of banks, and mortgage lending institutions. You can also search for mortgage brokers. However, if you plan to buy new construction you may go to the sample house, and ask for a list of pre-approved mortgage institutions. In fact, even if you have no intention of building or buying new construction, those lenders are usually well known, efficient or they would not be pre-approved with the builder and vice versa.
- How do I find a real estate agent?
The best way to find a real estate agent is to ask your friends, again, and find someone who has been around for a while in your community. You want someone who really knows the inventory and understands what you want. Usually, you’ll enter into contract with the realtor, and you cannot use anyone else until you find a home except under extreme circumstances.
- How can I research communities I would like to live in?
There are wonderful ways to research communities now. Use Trulia.com, or Zillow.com to help you find houses in the area you want to live, and links provided will show you facts and stats about that area. You can also drive around in the area to see how it feels to you.
- What should I pay particular attention to during the walk-through of the homes?
Other than the items, you want on your wish list, look for rotted wood around windows, black stuff on the roof (usually mold), and the size of the bedrooms, kitchen, and yard. Ask yourself if you like floor plan. What needs to be replaced? Carpet, appliances, or anything else? Make a note of these things because if you like the house those can be points of negotiation.
- What is the best way to keep track of the houses I look at?
Before you start looking, normally the realtor will chose three homes for you to evaluate to see which one you like the best. Up front you will give your realtor the specific amenities that you desire within your new home. How many bedrooms, baths, office, garden space and et cetera.
Your realtor will normally have a copy of the Multiple Listing Service (MLS) listings for each home you will be looking at, and will also give you a copy with all of the features of the dwelling. As you go through, you can also use the MLS listing copy to make any notes of issues you saw, and/or any repair issues that might be needed. If you desire to make photos of the inside of the dwelling, you may do so.
Note: I have 30 years of mortgage lending experience. I hope this will help for anyone who is new to starting the mortgage loan process.