Buying a house for the first time can seem pretty complicated, and first-time home buyers have plenty of questions to ask. But when you’re a first-time home buyer, there are some important questions that you might not know to ask.
You could leave it to your real estate agent or loan officer to tell you what you need to know. Or you could take matters into your own hands by asking the right questions first.
Here are the best 10 first-time home buyer questions to ask your home-buying team (and yourself) that will help you tackle the whole home-buying process confidently―all the way from house hunting to making an offer to closing.
- How can I find a good real estate agent?
- Do I qualify for a loan?
- How much house can I afford?
- What happens when I find a house I want?
- How can I prepare for closing on my house?
- Are there ways to save money on my home purchase?
- Should I get a fixed-rate mortgage or an adjustable-rate mortgage?
- How do I get the best interest rate?
- What is PMI? And do I have to pay it?
1. How can I find a good real estate agent?
A good real estate agent will help your home purchase go smoothly. Your agent will get you access to houses, answer your questions about the home-buying process, help you craft a reasonable offer, and take care of all kinds of paperwork. But a bad agent can cost you thousands in costly mistakes and make it more difficult to get the house you want. Make sure you find a trusted, vetted agent with a reliable reputation for helping first-time home buyers.
2. Do I qualify for a loan?
Before your real estate agent can take you house hunting, you need to make sure you actually qualify to buy a house. Lenders will look at a few different factors to decide whether or not you qualify for a home loan. Generally, you’ll need to meet the following qualifications:
- Credit score: Your credit score is a 620 or above.
- Debt-to-income ratio: You pay no more than 45–50% of your gross monthly income to recurring debts.
- Down payment: You’ve saved up enough to put at least 5% down on your loan (unless you plan to use an FHA loanor VA loan or you qualify for certain first-time home buyer programs).
Now, specific loan requirements will vary based on the lender and loan program you apply with. Some lenders, for instance, will require a 640 credit score. And some loan programs let you put as little as 3% down. But meeting the qualifications above means you’ll likely qualify for a home loan from most lenders.
3. How much house can I afford?
Before you start shopping for houses, you need to know how much house you can afford. Otherwise you might fall in love with something that’s way out of your budget (or settle for something you don’t love when you could actually afford a better house).
You can get part of the answer by applying for pre-approval with a lender. Lenders will pre-approve you for a certain amount, which can give you a budget for your shopping.
But don’t forget to think about your own preferences. What kind of monthly payment would you feel comfortable making? In some cases, you may want to buy less house than a lender will approve you for.
4. What happens when I find a house I want?
Once you’ve found the right house, you’ll work with your real estate agent to put in an offer. Your offer will include the price you’re willing to pay for the house, a planned closing date, and other important details. You can also include mortgage contingencies, or situations in which you’ll back out (like if the home inspection reveals big problems).
Once you approve the offer, your agent will submit it to the seller. After you put in an offer on a home, the home seller will get some time to consider your offer. With any luck, they’ll accept your offer. (Fingers crossed!) But in some cases, a seller may come back with a counter offer. The counter offer might negotiate a higher price, for example, or a later closing date.
Of course, a seller can always choose to reject your offer or let your offer expire. In that case, you can try to make another offer, or you can move on to another house.
5. How can I prepare for closing on my house?
When you close on a house, you mostly do two things:
- You sign legal documents (like a closing disclosure, loan estimate from your lender, and title documents).
- You pay your closing costs and down payment (usually via a cashier’s check or wire transfer).
The exact agenda and format can vary a bit depending on where you live. Some states require the seller, buyer, and their agents to all meet together. Other states have sellers and buyers sign documents at different times. Either way, though, closing finalizes the deal.
Plan to pay between 3–5% of the house price in home buyer closing costs. You’ll also pay your down payment at closing―which can be anywhere from 3–20% (or more) of the sales price.
6. Are there ways to save money on my home purchase?
Buying a house can cost a lot, but you can save money with home buyer rebates. Apply for grants for first-time home buyers too. These grants help you cover down payments and closing costs. Talk with your real estate agent and lender to see if you qualify.
7. Should I get a fixed-rate mortgage or an adjustable-rate mortgage?
Most lenders offer two kinds of mortgages: fixed-rate mortgages and adjustable-rate mortgages.
- With a fixed-rate mortgage, you have the same interest rate for the life of the loan.
- With an adjustable-rate mortgage, your interest can change during your loan term.
A fixed-rate mortgage will give you reliable monthly payments. But adjustable-rate mortgages often have lower interest rates, which can make them more appealing (as long as rates continue to go down and not up). Talk to your lender about your options and get their advice on what would make the most sense for your situation.
8. How do I get the best interest rate?
To get the best interest rate, you can do a few different things:
- Work to build a good credit score.
- Choose an adjustable-rate mortgage.
- Make a large down payment.
- Shop around and compare interest rates from different lenders.
- Buy mortgage points when you take out a loan.
Keep in mind, though, that you won’t have complete control over your interest rate. External factors, like market conditions and the Federal Reserve, will also affect the interest rates your lender offers.
Mortgage points let you pay money upfront to lower your interest rate. Each mortgage point costs 1% of your loan amount, and it will lower your rate between 0.125% and 0.25% (give or take). You pay for mortgage points at closing.
While paying for mortgage points will keep your interest rate down, they’re not always a good deal. If you plan to move in just a few years, for example, you may end up paying more upfront than you save in interest. So definitely do some math before you commit to buying mortgage points. You can ask your lender for different loan estimates and how each will play out depending on how long you stay in the house.
9. What is PMI? And do I have to pay it?
Most lenders require you to have PMI, or private mortgage insurance, when you have less than 20% equity in your home. You can get 20% equity in your home by paying a 20% down payment upfront. If you don’t want to pay for PMI, you can put 20% down upfront or simply pay down your loan over time until you have 20% equity. You can also find some lenders that don’t require PMI―but you’ll end up paying a higher interest rate instead, so that might cancel out the savings.
Next steps: find your first house
Now that you know a little more about what questions you should ask when you’re buying your first house, you’re ready to start the actual process. You can check out this list of the steps for first-time home buyers to make sure you don’t miss anything important as you go through the process.
And remember: you’re not in this alone. A good real estate agent and trusted loan officer will both guide you through the whole home-buying process. So if you have questions, ask away!