10 Most Common First-Time Home Buyer Questions

Buying a home is one of the biggest and most important things you'll do in your life but we understand that it can also be stressful and confusing, especially if you’re a first-time home buyer! In order to better navigate the process, we came up with a list of the most asked questions that we get from home buyers and provided you the answers! 

1. What Are The Benefits of Homeownership?

When owning a home, you not only enjoy many tax advantages, you also build equity as you pay down your mortgage and home prices rise! Home prices have a well-documented history of going up over time. The median home price in Vermont is currently $375,000, compared to the median home price of $154,475 in 2003! That's a growth of more than 240% in 20 years! 

2. What Does A Buyer’s Agent Do And Do I Need One?

A buyer's agent is not just a person who takes you to houses and opens doors for you - they are someone who works to represent you and ensure your best interests are kept front and center throughout your home search and purchase. The listing agent of a home, on the other hand, works in the best interests of the seller, therefore they aren’t working to get you the best price and terms possible or ensure the home suits your needs. 

On our team we not only listen to and get a great understanding of your criteria, but we’ll keep you up to date with any new listings or price changes as soon as they happen and most importantly, use our years of experience and knowledge of the market, loan options and homes, to guide and advise you so that you are making the smartest and best decision for you. This way you spend as little time and energy looking for a new home as possible and more time enjoying it with friends and loved ones!

3. How Much Does A Real Estate Agent Cost?

Your buyer's agent is paid for by a seller in almost all cases. That means your representation is absolutely free, so why not take advantage?!

4. How Do I Know What My Budget Is?

A lender will review your income, debt-to-income ratio, your credit score, your employment history, and your assets to assess how much they are willing to lend you. If you don’t have a lender yet, don’t worry - we have a few great lending partners that we can recommend you speak with before starting the home search process. 

Remember though when it comes to narrowing down a budget range, don’t stretch yourself too thin. Just because you are preapproved for a certain amount does not mean you should choose to spend up to that amount. Look at your monthly income and expenses and decide how much you feel comfortable spending each month and don’t forget to factor in the property taxes and insurance costs. Another good rule of thumb is making sure you have about three to six months of monthly mortgage payments in savings in case of any unexpected event.  

5. What Costs Can I Expect When Buying A Home?

There are a few costs to consider when you are purchasing. Some are due right away and some will be required a little later on down the line:

Contract Deposit/Earnest Money: Earnest money, or a contract deposit, is an amount of money you put down to show you’re serious about purchasing a home. You write this check as soon as you enter into a purchase and sale contract for the home. When a buyer and seller enter into a contract, the seller takes the home off the market while the transaction moves through the entire process to closing. If the deal falls through, the seller has to relist the home and start all over again, which could result in a big financial hit. Earnest money protects the seller if the buyer backs out, however if the deal terminates due to an inspection or other contingency that is written into the contract, the deposit would be returned to the buyer. It's typically around 1% - 3% of the sale price and is held in the listing agent’s escrow account until the deal is complete. If all goes smoothly, the earnest money is credited to the buyer at closing to go toward their closing costs or down payment. .

Downpayment: The down payment is the portion of the purchase price that you pay out-of-pocket (as opposed to borrowing). This is usually anywhere from 3% to 20% of the purchase price depending on what type of loan you are using. Some loans have 0% down options, however certain qualifications do apply. 

Inspection Costs: Inspections and other contingencies are generally part of a contract. Who pays for what is ultimately dependent on the terms of your contract, however, certain ones are typically paid for by the buyer and some are usually the seller’s responsibility. The typical buyer-paid contingencies range from (1) structural inspection (anywhere from $500-$700 depending on the size of the home), (2) radon test (about $150), and (3) water tests (vary depending on quantity and type).

Home Appraisal: An appraisal is an unbiased professional opinion of a home's value. They are required for anyone securing a mortgage loan. The appraisal assures the lender you are not over-borrowing for the property. An appraisal will typically cost you between $500-$750 out of pocket. That is paid when the appraisal is ordered, which is usually within the first two weeks of entering into a contract.

Closing Costs: Closing costs are the fees for the services and expenses required to finalize a mortgage. Closing Costs total up to around 3-3.5% of the purchase price and are due at closing. The State of Vermont does require that buyers pay Transfer Tax which is why the closing costs may seem high to some, especially for buyers purchasing from out of state. 

6. How Long Does It Take To Buy A House?

Every home sale is different, but typically once you find a home you want to buy and your offer is accepted, it takes 30-45 days to close on your loan. A buyer can take anywhere from a week to a few months shopping for the right home. The best home buying game plan is to start thinking about the process about 6 to 12 months out.

7. When Should I Get Pre-Approved?

It's best to get pre-approved early in the home buying process, this will help you decide what you can afford which can save you time and energy along the way! If you’re not sure where to start with this, reach out and we’ll be happy to connect you with a few of our preferred lending partners that can help you with this step. 

8. How Will I know Which Home Is The Best For Me?

We always suggest starting with a list. Decide which items are must-haves and which you’d like but aren’t required - this will help narrow down the homes you go look at. One of the most important factors in selecting a home is choosing your location. You can change many other things about your home (like a bathroom you’ll want to update) but you can’t change where your home is located! Think about your daily commute, the local schools, and proximity to your favorite stores or restaurants.

When you tour homes ask yourself: Does this home fit my needs? Do I like the neighborhood? Does it fit in my budget? And can I envision my family living here?

9. What’s The Biggest Mistake You See First-Time Homebuyers Make?

One of the most common mistakes first-time homebuyers make is forgetting to account for closing costs, which add-in around 3-3.5% of the purchase price and are due at closing. Another big mistake is not remaining flexible. There are many ups and downs when it comes to this process, including when you’re first looking for a home. Keeping your options open and your guidelines flexible will help you find a home that’s perfect for you, even if you may not have noticed it initially!

10. If I Don’t Know Where To Start, What Is My First Step?

Finding an agent that can provide you with resources, guidance and most importantly, that will represent you and your best interests will ensure you have the smoothest and most successful experience buying your new home! Whether you’re ready to buy or still aren’t quite sure, the best first step is to get in touch with us. We offer free home buying consultations where you will learn about what is involved in the home buying process and we will discuss what you’re looking for in a home, what the current market looks like and what you expect as well as how we’ll help you navigate it all. Email me to set up your free consultation today!