A home is the most significant purchase most people will make in their lives. Buying a house is a complicated and sometimes lengthy process, with many potential pitfalls along the way. Research, patience, and access to helpful professionals are key, as first-time home buyers have many questions that need answers.
Here are some of the most important things you need to know as a first-time homebuyer.
1. What Is the First Step in Buying a Home?
The first step is to assess your financial situation and decide on a budget. Now is the time to do as much research as you can, so you are prepared to speak with sellers, lenders, and real estate agents with confidence. You will want to contact lenders about the pre-approval process so you know how much you can borrow.
2. How Do I Determine How Much House I Can Afford in Louisiana?
Lenders will give you an upper limit for how much you can borrow, but that doesn’t mean you need to spend that much. Consider not only the down payment and total mortgage amount, but expenses such as property taxes, insurance, and closing costs. An online mortgage calculator can help you crunch the numbers and come up with a budget.
3. How Much Should I Save for a Down Payment?
The down payments for traditional mortgages are typically around 20%. Other loans, such as VA and USDA mortgages, require no down payment for those who qualify.
4. What Is A Mortgage Pre-Approval Letter, And How Does It Help?
A lender issues a pre-approval letter for a specific loan after they have evaluated your finances and determined how much they will lend. It helps prospective buyers as it shows sellers you have the financing in place to purchase their home.
5. What Is the Difference Between a Pre-Qualification and a Pre-Approval?
A pre-approval letter is a formal document that shows the lender has vetted you and approved your loan, while a pre-qualification is an informal estimate based on your own self-reported information.
6. What Does a Real Estate Agent Do?
Real estate agents help their clients buy, sell, and rent properties. While they are not technically necessary, they are extremely helpful in locating properties for buyers. They have a deep understanding of the financial, legal and documentation requirements of buying a property in Louisiana.
7. What’s the Difference Between a Realtor and a Real Estate Agent?
While these terms are often used interchangeably, there is a difference. Real estate agents engage in the buying, selling, and renting of houses as licensed professionals. Realtors are real estate agents who are also members of the National Association of Realtors. Therefore, all Realtors are real estate agents, but not all real estate agents are Realtors.
8. What Is the Difference Between a Fixed-Rate Mortgage and an Adjustable-Rate Mortgage (Arm)?
Fixed-rate mortgages have interest rates that remain the same throughout the life of the mortgage. Adjustable-rate mortgages change over time, depending on market conditions. Adjustable rate mortgages are appealing, as they typically start out with low rates; however, you must weigh the risk/reward of future rate changes into your decision.
9. What Is Homeowner’s Insurance?
Homeowner’s insurance protects your house and property from damage. To secure a mortgage, you need to have homeowner’s insurance, which can be rolled into your escrow payments. Depending on where you live, you may be required to carry certain types of insurance.
10. What Is Private Mortgage Insurance?
Private mortgage insurance (PMI) is separate from homeowner’s insurance. It protects the lender in case you default on your mortgage. Depending on what kind of loan you acquire, it may be required with a down payment of under 20%. You may be able to drop PMI once you have reached 20% equity in your home.
11. What Is An Escrow Account?
Your lender may set up an escrow account for expenses such as homeowner’s insurance and property taxes, and then pay those expenses on your behalf when they come due. This means a somewhat higher mortgage payment, but also the peace of mind of knowing these expenses are taken care of.
12. What Are the Closing Costs and How Much Should I Expect To Pay?
When you sign the contracts for your new home, you will probably pay closing costs. These include the costs of appraisals, title insurance, taxes, transfer fees and other administrative expenses. Expect to pay around 5% of the total mortgage cost. You may negotiate with the seller to help with closing costs.
13. Should You Take First-Time Homebuyer Classes in Louisiana?
While not required in Louisiana, taking a first-home buyer class is a smart move. Home Helpers Properties can help you with every step of the home buying process, answer your questions, and find payment options, even if you have bad credit.
14. What Is a Home Inspection and Why Is It Important?
A licensed home inspector will examine and evaluate a home’s condition prior to a sale to determine if there are any major issues. This means looking at the structural integrity, plumbing, electrical, and other basic systems. You may request specific inspections for things like mold pest infestation.
15. What Are Some Common Mistakes First-Time Home Buyers Make?
First-time home buyers often underestimate the total costs involved in buying a home, or choose a home that is too expensive for their budget. It is important to be honest with yourself about your financial situation and seek advice from a professional to avoid a potential foreclosure.
First-time buyers may also choose to cut costs by forgoing a real estate agent. This is often a big mistake, as real estate professionals can work on your behalf to make sure you are in the best position when buying a home.
All of Your First-Time Home Buyer Questions Answered
When it comes time to buy your first home, it’s smart to partner with professionals who can help you along every step of your journey. First-time home buyer questions may seem complicated to you, but experienced real estate agents have seen it all.
If you are in Louisiana, take the time to reach out to Home Helpers Properties. We specialize in helping first-time home buyers, even those with bad credit.
Contact us today and find out how we can put you in the perfect home.