8 Questions Every First-Time Homebuyer Needs to Ask
Congrats! You’ve made the decision to buy your first home. Now what?
The homebuying process can be very overwhelming, especially if it’s your first time. There’s a ton of jargon, decision-making, and steps in the process to figure out as you go. It can be scary to think of all the pieces that go into buying a home. I am currently going through the process of my first home purchase, so I am right there with you!
To help you get started, I am going to share eight questions I learned to ask throughout the process. You are more than likely going to have many more questions come up throughout your own experience, but use this list as a starting point.
Some of these questions have straightforward answers, such as what is an EMD (Earnest Money Deposit)? Others will have answers that vary based on your own situation and your own preferences. We’ll go into some of these answers in the coming weeks as our blog posts dive further into the homebuying process for first-time buyers.
Don’t forget to download our free checklist and note pages so you can track these questions and more as you buy your home! You can download this free resource here!
1. How much house can I afford?
First, get pre-approved! This is a great first step that will save you time and stress later on. With this as your first step, you can go into the process knowing your affordability and setting realistic expectations for what type of house you can get.
The mortgage pre-approval process involves providing your lender with various documents that show your income, credit score, and more. Some documents you should have ready to go include your social security number, valid ID, proof of employment and proof of income, tax documents, and credit information.
You can get this process started as soon as you like. For example, I got pre-approved in October 2020 even though I didn’t plan to buy a house until 2021. Just know that your pre-approval letter typically expires within 60-90 days, so you will have to provide your lender with updated information if you go beyond that initial time period. Don’t feel stressed to make a decision within that 60-90 day period though; updating your pre-approval letter is quick and easy since your lender already has all your information!
Once you have your pre-approval and know your affordability, set your budget based on that. I suggest setting your budget below the amount you were approved for to account for additional costs such as closing costs, the home inspection, the appraisal, any home repairs, and insurance.
2. What am I looking for in a neighborhood/community?
This will, of course, depend on your personal preferences and needs. Some important things to consider are HOA fees, amenities, lifestyle of the neighbors (do a lot of them have young children? Are they mostly older couples or younger couples?), school district, safety, and walkability.
Whatever your preferences are, you’ll want to make sure your new community aligns with what you’re looking for. You might find the perfect home in a neighborhood that's completely wrong for you. Will you be willing to sacrifice the location for the house itself? This is important to discuss beforehand!
3. How long do I plan to stay in this home? Will it fit my needs 3-5 years from now?
This is a very important question to not overlook. You probably plan to stay in your first house for at least a few years, maybe more. You want your house to meet your needs until you’re financially ready to move up to a different house. Do you plan on growing your family within the next few years? If so, does your house have room to grow? Do you anticipate making a job change soon that will affect your commute needs? Is the house practical for a baby or toddler?
Your first house does not have to be perfect by any means! But make sure it will work for you and your family for at least a few years.
4. What’s included with the home purchase?
The listing description usually states which appliances are included in the sale, but check with your Realtor® as well! You’ll want to make sure you know which appliances you’ll have and which ones you can expect to buy yourself.
Don’t be afraid to ask about things that may seem obvious. I had to ask my Realtor® if the ceiling fans were included (they were!). Built-in appliances are considered fixtures, so you can expect those to be included in the sale. Other appliances, however, are considered personal property of the seller, such as a free-standing refrigerator, washer, and dryer. While unlikely, the seller is entitled to bring these appliances with them to their new home, so make sure you’re aware of what’s staying and what’s going.
5. What are the closing costs and other hidden costs?
Closing costs are typically 2%-5% of the loan cost. It might be possible to roll this cost into your loan, so check with your lender about that! You can also request closing cost help in your contract; this is an option you can discuss with your agent before you make an offer.
Other hidden costs to anticipate include property taxes, earnest money (discussed below), homeowner’s insurance, utilities, and moving costs. Make sure you discuss all of these costs with your lender and/or agent so you know what to expect!
6. Who is responsible for setting up the home inspection?
This can vary by Realtor®, so clarify with your agent whether you should expect to set up the inspection or if they will do it. Your agent can also provide you with inspector recommendations.
This is usually a $300-$500 cost depending on the size of the home, but don’t forgo the inspection! This small investment during the buying process can save you much more money and time later down the road if there are issues that need to be addressed.
7. How much down payment do I need?
This will depend on what type of mortgage you get.
Conventional Loan- As little as 3% down
This loan is not insured or guaranteed by the government, but is instead backed by private lenders. You can put as little as 3% down with this type of loan, however, it’s recommended to put down at least 10% to reduce your monthly payments.
FHA Loan- As little as 3.5% down
This loan is good for buyers who need to make a smaller down payment and/or have a lower credit score. FHA loans do, however, require the borrower to purchase mortgage insurance.
VA Loan- As little as 0% down
This loan is available to veterans and active members of the U.S. military and eligible spouses.
USDA Loan- As little as 0% down
This loan is for borrowers buying in a qualified rural area, which is typically an area with a population of less than 20,000. Borrowers must also meet monthly income caps in order to qualify for this type of loan.
8. Can I get my earnest money deposit (EMD) back if I decide not to buy?
EMD stands for earnest money deposit and essentially shows the seller you’re serious about buying their house. This deposit is typically around 1%-3% of the sale price and stays in an escrow account until the entire process is completed. The amount can change depending on the type of market you’re buying in, so reach out to your Realtor® for guidance on how much to include in your deposit!
There are several possible outcomes when it comes to an EMD. If all goes to plan, the EMD goes toward your down payment or closing costs. If you, the buyer, back out, the EMD acts as an insurance for the seller, and you will lose the money you put into the deposit. If the deal falls through due to a valid reason, such as undesirable home inspection results or appraisal, you can get your EMD back.
Buying your first home can be intimidating, but it’s an incredible and rewarding experience! You should get to enjoy the process as much as possible. I hope these questions help you as you journey into this new chapter of your life. Comment down below any other questions you have!