Whether this is your first experience buying a home or you are a seasoned buyer and seller you may have questions about the buying process. Policies and procedures change often and can be different from one state to another. Below are links to frequently asked questions and general information about the home buying process here in the Tampa Bay area. Please feel free to contact us at 813-230-5804 for any and all questions!
The most common question I am asked by First Time Homebuyers is… “How much will it cost me to get into my first home?” Knowing the answer to this question will let you know right away whether you are ready and able to move forward today with your plan to buy your first home.
There are three areas to consider when determining how much it will cost you to get into your first home. There are costs involved in making an offer, inspecting the home and securing your financing, and closing costs involved to close on your home including a down payment required by your lender.
When you submit an offer to purchase a home it is customary to offer a good faith deposit (also called an escrow deposit). It is an amount you are willing to give to the seller if you default on your contract. The purpose is to show the seller you are serious about buying their home. This deposit will go toward your purchase of the home at closing. The amount you put down is up to you to decide and can vary based on the price of the home and what is customary in your area. I suggest you let your Realtor help you determine the appropriate amount, who will hold the deposit until closing and whether it should be submitted immediately with the offer or as soon as your offer is accepted. It is possible the seller may ask for a higher amount when negotiating the acceptance of your offer.
Additional costs that you may have when purchasing your first home will be a home inspection ($350 and up), WDO/pest inspection ($75 and up) and possibly a wind mitigation inspection ($75 and up - this can greatly reduce the cost of your homeowner’s insurance) and a 4-Point Inspection. Also, your lender will ask you to pay for an appraisal when they take your loan application ($400 and up) and some may charge an application fee. Don’t be embarrassed to ask your Realtor if you don’t understand fees or terminology. A good Realtor wants their client to feel comfortable throughout the entire process!
Closing costs vary greatly by area, so the best advice I can give you is to contact a Realtor or lender in your area and ask. Here in the Tampa Bay area closing costs are anywhere from 4-6% if you are financing your purchase and 1-2% if you are paying cash.
One way a first time homebuyer can minimize their out of pocket closing costs is to ask the seller to pay some of the closing costs as a part of the purchase contract. It is not uncommon for buyers to ask sellers to pay 3-4% of their closing costs. Many new home builders will offer to pay some or all of your closing costs for you. Be sure and take a Realtor with you when you visit a new home sales center. An agent who is educated in negotiating for new homes can save you money and ask for items you may not have considered.
It is important to keep in mind that you are asking the seller to take less than their asking price when you ask them to pay your closing costs. Whether negotiating on a new or resale home, you may have to offer the full asking price or more than their asking price to make this option appealing to the seller.
The amount of money you need to get into your first home also depends on the financing options available to you. Three of the lowest cost options for financing are VA loans, FHA loans and USDA loans. Today most conventional loans require a 10-20% down payment, however there are other loan programs so be sure and ask your lender about your options.
VA and USDA loans allow you to put 0% down payment on your mortgage and FHA allows you to put down as little as 3.5%. There are also various down payment assistance programs offered that may be able to assist you with your down payment. Your best resource is a knowledgeable lender. Don’t be afraid to contact a lender and ask questions. If they don’t know about down payment assistance programs, try another lender. Most lenders work on some sort of payment structure that is based on the number of loans they close. If they don’t make loans they don’t get paid so they want to find you financing that will work!
Once you know whether you have the funds needed to move to the next step in the home buying process you will want to understand the overall home buying process.
Want to buy a home, but don’t know where to start? I hope the following explanation will help you better understand the steps involved and give you the confidence to move forward with your dream of home ownership!
The process is actually fairly simple, but there may be terms and phrases that Realtors use that you may not understand. If you are like me, sometimes the fear of a little unknown information within one step in the process can stop me from moving forward. If you read this article and still have questions, feel free to contact a Realtor for help. If they can’t or won’t answer you question, try another Realtor. It is not only our job to sell homes but to educate buyers and sellers about the current market and the overall process. Any good Realtor will be happy to answer all you questions and make you feel comfortable with the process!