Home Buyer's FAQ

By Elizabeth Joy — July 13, 2024

Hi! I'm guessing you've stopped by this page cause you're curious about the home buying process. Well, you're in luck because I've put together a list of the most frequently asked questions for your reading pleasure.

1. I have no idea what my home buying budget is, how do I figure this out? This is typically top of mind when starting the home buying process so you're not alone if you have no idea what the answer is to this. Lenders determine your budget capacity based on factors such as income, credit score, debt-to-income ratio, and down payment.
2. What is a pre-approval and do I really need to get pre-approved before we start looking at homes? A pre-approval is a lender's initial commitment to lend you a specific amount for a home purchase. Yes, this is what lets us know what your budget looks like so we're not getting emotionally invested in homes outside of that budget. I also always send the pre-approval with an option to purchase to let the sellers know we are serious buyers and will have no issues making it to the closing table.
3. How much should I save for a down payment? When this question is asked people typically think they need 20% and while that is true to avoid private mortgage insurance (PMI) it is not necessary. In fact there are many first time home buyer programs that will allow you to put down as little as 3%. My advice is always to put down what you're comfortable with and what will not leave you strapped for cash once the home is purchased.
4. What are closing costs, and how much should I budget for them? Closing costs are fees associated with finalizing a real estate transaction. They typically include lender fees, appraisal fees, title insurance, and taxes. Buyers should budget around 2% to 5% of the home's purchase price for closing costs.
5. What is earnest money, and how much should I offer? Earnest money is a deposit made by the buyer to show their commitment to the purchase, it is only paid if you receive an accepted offer and it goes towards closing costs. You can put down whatever your heart desires — I usually recommend 1%–2% of the purchase price.
6. What's the difference between a home inspection and an appraisal? A home inspection is conducted by a licensed inspector to check for any issues with the home; main items would be HVAC, the roof, plumbing, electrical and any structural issues. An appraisal is an evaluation of the home's market value conducted by a licensed appraiser and this number is strictly for your lender. I say this because the appraisal gets confused often times with an assessment — assessments are for taxes and appraisals tell the lender how much they can lend, capisce?
7. What happens if the appraisal comes in lower than the agreed-upon price? The lender can only lend on the amount that it appraises for, so if there's a gap someone needs to make up for it. This can happen in the following ways: the buyer agent can negotiate with the listing agent to reduce the purchase price, make up the difference in cash, or terminate the contract.
8. How long does the homebuying process take? On average, it takes 30 to 45 days from accepted offer to closing, but it can be shorter or longer depending on the circumstances such as inspection time, lending time and how long or short the seller and/or buyer would like the closing process to be.