FAQ - I am a First-Time Home Buyer
What programs exist for first-time buyers?
There are up to ten programs in California, and some Federal assistance programs for first time home buyers. A qualified lender will be your best source in explaining the ones that may apply to your financial situation. If you are not currently connected to a lender we would be glad to make introductions for you. There are also title and escrow companies who provide discounts of up to 25% of title insurance for first time home buyers. Reach out to us to learn more.
Can I buy a home with student loan funds?
The quick answer is NO! Student loans are only allocated for your educational expenses. But, you can buy a home if you have student loan debt if you financially qualify for a home purchase loan.
What happens after my offer is accepted on a home I want to buy?
Well, from our viewpoint it is when the fun begins on your home buying journey. You are through searching for the perfect home and your purchase offer on your selected home has been accepted. Your actions steps the next 30 to 45 days are days are determined on the terms you put into your accepted purchase agreement. We refer to this as the “escrow calendar” There are typically six steps that will need to be completed. 1) Open escrow at the agreed upon title company. They will manage the process all the way to recording the ownership of the home with the county’s recording office. 2) Your good faith initial deposit is transferred to the title company’s escrow account to be held until the home finally changes title. 3) Manage through and remove any contingencies (exit doors from the agreement) that were accepted in your purchase agreement. These could include contingencies for inspections, appraisal, mortgage loan qualification and securing homeowner’s property insurance. 4) Review the mortgage documents and the costs associated with your home purchase that the mortgage company and the title company will organize. 5) Your final walk-through of the home about five days before the title is scheduled to transfer to make sure the home is in the same condition it was in when you purchased it. This is referred to as the Verification of Property Condition. 6) Wire transfer your remaining downpayment to the title company two or three days before the home is scheduled to change title to your name.
What contingencies should buyers keep or waive?
First of all, let's provide a simple answer as to what are “contingencies” related to a purchase agreement for a home. There are four contingencies that are available in a California residential purchase agreement; 1) Inspections of all aspects of the home’s condition; 2) Appraisal of the home's value ordered from the home buyer’s lender; 3) Loan Approval where the lender gives you a letter that they states you are financially qualified to purchase a specific home; and, Insurance, where you have secured an insurance policy for the home you are buying that is acceptable to you. A contingency is an exit door for you from your purchase agreement if any of those four contingencies create a situation where you exit the agreement before the contingency ends. If you do exit the agreement during any contingency periods you are refunded your initial deposit that had been deposited in the title and escrow company’s trust account
What costs surprise first-time buyers?
Some costs that may surprise first-time home buyers are inspection costs such as home and wood destroying pest inspections during escrow, closing costs such as lender/title and escrow fees, insurance costs, property tax, and home maintenance items for repairs/updates. Read more here to learn how to avoid making the most common mistakes as an east bay home buyer.
How much house can I realistically afford?
The price of the home you can afford if you are securing a mortgage in order to purchase it depends on your debt to income ratio. For example, if you have a lot of credit card debt, that will be factored into your debt to income ratio. Lenders typically use the 28/36 Rule to determine the maximum price of a home you can afford. Another factor is the interest rate on the money I am borrowing. So, the guideline suggests that your housing costs - mortgage payment, property taxes and insurance, not be higher than 28% of your gross monthly income.
What mistakes do first time home buyers make?
There are mainly 5 common mistakes we see first time home buyers make.
They are: Not getting pre-approved early in the process, underestimating the true cost of homeownership, skipping home inspections, letting emotions override logic, and ignoring long-term value and location
How long should I plan to stay in my first home?
The answer to how long you should stay in your first home depends on the zip code. For example, if you lived in the midwest your home is typically not getting much appreciation during the time you live there. If you purchased a home in the San Ramon Valley, you probably should stay in the home a minimum of five to seven years in order to secure the appreciation that happens in our region of the San Francisco Bay Area. The minimum you should stay in any home you purchase is at least two years in order to avoid capital gains.
What matters more: the house or the location?
Location matters more. A phrase used in real estate is, Location, Location, Location. You can always change the condition of the home, but you can never change it’s location. Find out why location is so important here.
Should I wait for interest rates to drop?
It is risky to wait for interest rates to drop to purchase a home that meets your needs and budget. When mortgage rates start to drop it often drives up buyer demand for homes which then drives up the prices. When you find that home which meets your needs it is better to purchase it and then refinance it later. Home values in California rarely drop, especially here in the East Bay, so waiting may not benefit you financially. Read more here about how to buy a house.
Is buying a first home different than buying again?
No, buying a first home is no different than buying again. While there are some programs offered to first time home buyers to assist them financially, the process of buying a home remains the same.
How early should I talk to a lender before buying in the East Bay?
Ideally before you tour homes. Early conversations help you understand your real budget and strengthen your offer when timing matters.