Spanish Springs Realtor - Michelle Escalante - License #: S.193607

FIRST TIME HOME BUYER

Are you ready for home ownership?

Owning a home in Northern Nevada may be your dream, but to ensure a positive and fulfilling experience, it’s important to be both financially and mentally prepared for the responsibilities that come with it.

Many people think homeownership is simply like renting, but with the freedom to have pets or paint the walls however they like. While these perks are true, they also come with the responsibilities of a mortgage, property taxes, and ongoing maintenance. To prepare for homeownership, it's essential to take a close look at your finances and set realistic expectations.

Questions for Prospective Homeowners

How much should I save for a down payment?

A standard down payment is typically 20% of the home's purchase price, but many first-time buyers can qualify for loans with as little as 3% down. However, saving more can help reduce your monthly mortgage payments and avoid private mortgage insurance (PMI). It’s important to also account for closing costs, which can range from 2-5% of the home price.

What is the difference between pre-qualification and pre-approval?

Pre-qualification is an estimate of how much you might be able to borrow based on self-reported information. Pre-approval, on the other hand, is a more formal process where a lender verifies your financial details, including income and credit score. Pre-approval gives you a clearer idea of how much you can afford and strengthens your offer when house hunting.

How do I know how much home I can afford?

A general rule of thumb is that your monthly mortgage payment should not exceed 28-30% of your gross monthly income. You’ll also want to consider your debt-to-income ratio, which should be no more than 36-43% (including all debts like car payments or student loans). Online mortgage calculators can help you get an estimate, but working with a lender will give you a clearer picture.

What are closing costs and how much will they be?

Closing costs are fees associated with finalizing your home purchase and typically include lender fees, title insurance, home inspections, appraisals, and other related expenses. They usually range from 2-5% of the purchase price of the home. In a buyer’s market, where there’s less competition for homes, the seller may offer concessions, helping to cover part of your closing costs or even buying down your interest rate to reduce your monthly mortgage payment. It’s important to discuss these options with your agent to understand what may be negotiable.

What is the process for making an offer on a home?

Once you find a home you like, your real estate agent will help you make an offer. The offer includes your proposed price, contingencies (such as a home inspection or financing), and the closing timeline. The seller can accept, reject, or counter your offer. If your offer is accepted, you'll proceed to inspections and finalizing the loan.

What is a home inspection and why is it important?

A home inspection is an in-depth evaluation of the property by a licensed professional to check for potential issues, such as structural problems, plumbing or electrical issues, or pests. It’s important because it can uncover hidden issues that might affect the value or livability of the home. Depending on the findings, you may negotiate repairs or walk away from the deal.

What is the role of a real estate agent in the home buying process?

A real estate agent helps guide you through the home-buying process, from finding homes that fit your budget and preferences to negotiating the best price. They have local market expertise and can advise you on pricing, contracts, and deal terms. Additionally, they’ll help with paperwork and ensure the process moves smoothly.

What are property taxes and how are they calculated?

Property taxes are taxes levied by local governments on real estate based on the value of the property. They vary by location and are typically paid annually. To calculate property taxes, the local tax assessor multiplies your home’s assessed value by the local tax rate. Make sure to factor property taxes into your budget when considering homeownership.

What is PMI and when do I need it?

Private mortgage insurance (PMI) is required by lenders when you make a down payment of less than 20% on a conventional loan. PMI protects the lender in case you default on your mortgage. Once you’ve built up 20% equity in your home, you can typically request to cancel PMI, reducing your monthly payment.

How long does it take to buy a home?

The home buying process can take anywhere from a few weeks to a few months. From making an offer to closing, it generally takes 30-45 days. However, if you’re in a competitive market or need to wait for loan approval, it may take longer. Your timeline will also depend on finding the right home, inspections, and financing approval.