by Kurt Johnson
Residential Sales Manager, Liberty Bank
There’s a lot that goes into buying a home, and all first-time homebuyers have lots of questions. Your loan officer can sit down with you and discuss your specific situation, but in the meantime, here are a few commonly asked questions about the home buying process.
Q: Do I need to save 20% of the purchase price for my down payment?
A: This is common misconception. There are a variety of low-down payment programs available, some with as little as 3% required. Additionally there may be down payment assistance programs and grant programs available. These programs often have varying criteria, so consult with your local loan officer to see which available programs may be a fit.
Q: How much are closing costs?
A: For a buyer, closing costs typically range between 2 and 5 percent of the purchase price. These costs include everything from lender fees, attorney expenses, and property-driven expenses like property taxes and homeowners insurance. When you apply for a home loan, you will receive an official Loan Estimate that provides a breakdown of what to expect.
Q: What are Points? Do I have to pay them?
Points can be paid up front (typically at the closing) to buy a lower interest rate. One “Point” is equal to one percent of the loan amount. Many loan products have the option of paying Points or taking a “par” rate, which is a rate with no Points. Whether or not you will benefit from paying Points will depend on how long you plan on staying in the house, and on your individual financial situation. Your local loan officer will be able to help determine your options and whether Points are a good option to consider or not.
Q: How long will the home buying process take?
Purchase transactions generally take 30 to 60 days, sometimes a little shorter, and sometimes longer. The mortgage process will typically mirror the timelines outlined in the purchase contract. As there are a number of moving parts to a real estate transaction, it is always good to make sure your real estate agent and local loan officer are in close contact throughout the process from initial offer to closing. Open communication is of utmost importance to ensure a smooth and timely process.
Q: Should I get pre-qualified or pre-approved? What’s the difference?
A: With a mortgage pre-qualification, you provide information regarding your debt, income, and assets. The loan officer would review that, along with your credit history, to provide an estimate of how much you can expect to borrow. A mortgage pre-approval is a more advanced step that requires supplying the lender with all the documentation to fully assess your creditworthiness. The pre-approval process allows the lender to issue a conditional commitment/approval letter, subject to you signing a fully executed sales contract and an appraisal being conducted on the property.*
*Other terms and conditions may apply.
Do you have questions about the home buying process? Contact a loan officer today.