Buying your first home is an exciting process, but it can also be very overwhelming! Homes are an investment, and as a first time buyer, odds are this is one of the biggest purchases you’ve had to make. You may have a lot of questions and concerns that you need answers to. Luckily, that’s exactly what a great realtor can help with!
As realtors, we do our best to educate our clients on the ins and outs of the home buying process, so they have a good understanding and feel confident that they’re making the best possible decision for themselves. In the meantime, we always recommend reading as much information as you can. When it comes to real estate, knowledge is power! Today, we’re sharing a few of the most common questions first time buyers ask, so you feel prepared to start your journey!
What exactly is a mortgage?
Only about 10% of buyers purchase their homes with all cash. All other buyers must borrow some money to pay for their home, which primarily comes in the form of a mortgage, which is a special type of loan. Mortgages offer a few benefits, a few of which include:
- Lower Interest Rates- Under 3% annually on average.
- Extended Repayment Periods- This allows you to pay off your loan over a long period of time. The average repayment time is around 30-40 years.
- Option for Fixed Rates- While you have the option for adjustable monthly rates, most people tend to choose a fixed rate, so their monthly payment stays the same throughout their loan’s term.
Simply put, the amount one pays out of pocket for their own home is considered the down payment. The mortgage is there to help pay for what is left over.
How much should my down payment be?
You’ve probably heard that you need to put 20% down on a house. While this is great, it is definitely not required in order to purchase a home. It turns out, the average down payment on a home is only 6% of the home’s total price. This is much more manageable!
If you’d prefer to make an even lower payment, you can look into loan programs that allow you to put down less than 6%. For example, USDA and VA loans require a 0% down payment, and FHA loans require 3.5% down. Whatever your situation, we can find an option that works for you!
Is my credit score good enough?
For the majority of average loan programs, you’re required to have a credit score of at least 620 to qualify as a first-time buyer. Typically, loans that grant you a smaller mortgage rate (and thus allow you a bigger house budget) require a higher score. If you have what is considered an “excellent” score of 720 or more, you are likely to be approved for almost any loan programs. For those reasons, it will be worth your while to work on raising your credit score before buying your first home.
Have more questions? We’re here to help. Visit our “Common Buyer Questions” page on our website, or contact us at (832)-866-6122 to get the one on one consulting you need!
