As a first-time home buyer, there are plenty of questions racing through your mind as you begin the home search. Most people are familiar with the jargon used in leases. When it comes to real estate terminology, many words just fly above your head. In this post, I will answer the top five most common questions asked by first-time home buyers. If I don’t cover a specific question you have, don’t hesitate to leave a comment, and I’ll be more than happy to answer your question.
1. Is buying a home better than renting?
While renting an apartment, condo, or house, your monthly rent is not invested into your property, so you don’t see any type of return on rent paid. Most rental properties won’t allow you to paint walls, landscape, or change the design of the property. All in all, you don’t have control over your rental as you would with a purchased home. The best way to look at purchasing a home is that it’s an investment. With owning your own home, you have the freedom to modify things within and surrounding the home. Plus, your money is actually going somewhere instead of in the pockets of others. Another great perk about purchasing a home, you can actually deduct the cost of your mortgage loan interest from your federal income taxes and often from your state income taxes. Another deduction can be your property taxes you pay. Other than all of these items mentioned, the government is offering a tax credit for first-time home buyers when the property closes before June 30th. If you qualify, you can receive up to $8,000 as a first-time home buyer or $6,500 for a long-term homeowner tax credit.
2. How do I know I’m ready to buy a home?
The best way to know if you’re ready to purchase a home is to look at your current situation. You need to make sure you have a steady source of income, and that you have been regularly employed for the past 2-3 years. If your income isn’t reliable, then you need to make sure you have a dependable job. If you default on your monthly mortgage payments, then you can have your home taken away by your lender. Unlike renting, this simply isn’t an eviction notice. If your home goes into foreclosure, you can dramatically hurt your credit score (stays on for 7 years) which can keep you from getting a good loan in the future.
Checking your credit score is something that will be done whether it’s by you or by the bank. Other information like good record of paying bills and any outstanding long-term debts can affect you credit score. Many banks will be happy to meet with you about your score and suggest ways to improve it, so you will be able to be approved for a loan.
You also need to make sure you have money saved for a down payment on a home in addition to the ability to pay the monthly mortgage note on top of additional expenses. If everything in this section checks out with you, then you’re ready to start the home buying process.

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3. What exactly are “HUD homes,” foreclosures, and short sales?
If someone can’t make the payments of a HUD insured mortgage, the lender will foreclose on the property. HUD will pay the lender what is owed on the mortgage, and HUD obtains ownership over the home. Then, they try to sell is as quick as possible at market value. Most of the time, you can get a very good deal out of one of these homes.
When a homeowner can’t make their monthly mortgage payments to their lender, the property can be foreclosed by that lender due to the borrower’s failure to make payments. These can also be good deals for first-time homebuyers or first-time property investors. You can luck out by purchasing the home for what is owed on the mortgage.
A short sale is the sale of a property in which all the proceeds fall short of the balance owed on the property’s loan. This often happens when the borrower cannot pay their mortgage. But instead of foreclosing, the lender decides that selling the home for a slight loss is better than stressing the borrower. In this type of process, both the lender and the borrower agree to it, because it enables them to avoid foreclosure which can involve hefty bank fees and a more damaged credit score to the borrower. These are also great deals on the market, because of buyer being able to buy a good house at a cheaper price.
4. Do I need to use a real estate broker/agent?
I always recommend using a real estate broker. Many brokers can help ease the home buying adventure through their years of experience. C’mon, they do this for a living! If you have any questions about the area or housing market, your real estate agent will be able to answer them. The next step is to find an agent that you will enjoy working with, because you will spend a lot of time with them. A good agent will understand you and strive to get you all the important things you’ll want to know and have in your home. They can provide you with information on the best neighborhoods and school districts. Brokers have access to homes once they are put on the market, so you don’t have to worry about driving through endless neighborhoods to try to find the house that meets your specific criteria. That in itself can be exhausting, so trust in your local agent to assist you in finding the perfect home for the period in your life.
5. How do I find a mortgage lender?
There are several avenues in choosing a mortgage lender. You can finance a home with a bank, a credit union, a private mortgage company, a savings and loan, or various state government lenders. When you go shopping for a loan, it can be a lot like shopping for the home itself or any other large purchase. The best thing is to take the time to look around and find the best prices and interest rates. A great person that can lead you in the right direction of a lender to use is your real estate broker. They will most likely now the local lenders and interest rates in the area. A lower interest rate can make a drastic difference in how much home you can afford. It can take on average 3-6 weeks for the whole loan approval process. (If you don’t know by now, most home buying situations are not at the fastest pace in the world unless you plan on paying cash for the home which not many people can do.)
All in the all, your first time buying a home will be a momentous and enjoyable milestone in your life; although, it can be filled with difficult decisions and some waiting. If you surround yourself with a good team (agent and lender), they can help make this adventure an easier one.
For a good link on real estate terminology, see the following link:
http://realestate.yahoo.com/info/glossary;_ylt=Ap8ZRRUB.Gs7_ueMaveJntjT4JF4
References:
http://www.hud.gov/buying/comq.cfm
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/buying/buyhm
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bank, buy a home, credit score, credit union, foreclosure, home prices, HUD, investment, lender, low interest rates, mortgage rate, Real Estate, real estate agent, real estate broker, short sale, tax credit