Buying your first home is daunting—and the list of unknowns can seem endless.“For a first-time buyer, it’s natural to feel embarrassed to ask questions that may seem silly or obvious,” says Joy Martin, president of American Caribbean Real Estate in Key Largo, Fla. But becoming an informed buyer is nothing to be ashamed of. Read these five questions and answers before you hit your next open house.
What can I afford?
To figure out the real cost of buying a home, factor in your down payment, estimated closing costs, as well as your monthly mortgage payment, insurance and taxes. Be sure to take into account any upcoming life events such as a wedding or job change when determining your budget (calculate a detailed list of expenses here). For a specific breakdown of what you can afford, speak to a couple of credible lenders and get preapproved so you know exactly what your home-buying budget is.
I have bad credit. Can I even buy a home?
In short, yes. Loan programs, including the FHA loan, insured by the Federal Housing Administration, allow borrowers with a 580 credit score or higher to purchase a home with only a 3.5% down payment, says Martin. Others may need a family member or friend to cosign the loan—another reason to speak to a credible lender for credit assistance.
What’s the difference between title insurance and homeowners insurance?
“Many first-time buyers think that title and property insurance are the same thing,” explains Martin, and they fail to budget properly for both. Most first-time buyers know about the homeowners insurance required by lenders to protect the home, but aren’t aware that they also need to insure the title. Title insurance is a onetime fee paid at closing that ensures that the entire boundary of the property is owned by the buyer and that he or she will be defended in court should ownership be challenged.
Do I need an inspection?
Even if you’ve walked through your prospective home a dozen times, getting a trained professional to assess its condition is key. Home inspectors are experts at unveiling problems with the home, which are often not pointed out by the seller. Martin suggests attending the inspection to learn about elements you can’t assess yourself, like septic, electrical and heating systems. For buyers, hiring an inspector is often optional, but most real estate professionals strongly encourage it. Inspections run about $300 to $500 per home. Make sure to save a copy of the inspection report so that you can refer back to it if problems crop up after move-in.
Do I need a house survey and an appraisal?
First-time buyers don’t realize that they may need both. Conducting a survey of the home provides a permanent record of property lines and helps verify the existing physical boundaries of the property. Getting an appraisal simply determines the market value. “It is typically a condition of a loan approval that the property must appraise for purchase price or better,” Martin explains.
Purchasing your first home? Don’t get blindsided by costs. Use the tips above to navigate the buying process and then get an affordable home insurance quote quote through the GEICO Insurance Agency to see how much you could save on quality coverage for your home and belongings.
By Alina Dizik