23 Common First-Time Homebuyer Questions: Your Questions Answered

Buying your first home is an exciting milestone, from browsing listings on Redfin and touring open houses to imagining life in your new space. But the buying process also raises plenty of questions, and that’s totally normal. If you’re wondering what to expect, you’re not alone.

We’ll walk through some of the most common first-time homebuyer questions. Whether you’re looking for a home in Hartford, CT or Newark, NJ, this guide will equip you with all the answers you need. Let’s get started.

In this article:

• Understanding if you’re ready to buy a home
• Budgeting for your first home
• Finding the right mortgage
• Navigating the homebuying process
• What comes next?

Getting started: Are you ready to buy a home?

1. What is a first-time homebuyer?

Generally, a first-time homebuyer is someone who hasn’t owned a primary residence in the past three years. You can also be considered a first-time buyer if:

• You’ve shared ownership of a house with a spouse in the past, but are now buying solo.
• You’ve been renting or living with family.
• You haven’t held a mortgage in three years.
• You’re buying in a designated redevelopment area, where certain programs have less strict rules.

2. Am I ready to purchase a home?

If you’re wondering if you’re ready to buy a house, consider these three factors:

• Financial stability: If you have a low credit score, lots of debt, and not enough funds to cover a down payment and closing costs, you may want to wait to buy a home.
• Job security: Stable employment and income are key indicators for lenders when qualifying for a mortgage.
• Future plans: It might not be a good time to buy a home if you plan on moving in two years or less.

3. How long should I plan on living in this house?

While there’s no golden rule for how long you should plan to live in your first home, it’s ideal to stay at least several years. This way, you’ll have a chance to build equity. The longer you own your home, the more equity you’ll build, leading to greater financial return when you decide to sell your home.

>> Read: How Long Should You Live in a House Before Selling?

4. When is it a good time to buy a house?

Ultimately, it’s a good time to buy a home when you’re ready for it. Your financial readiness and long-term goals are both great factors to think about. On top of that, it’s also smart to check your local housing market trends and mortgage interest rates. Speak with a real estate agent to help determine if you’re in a good position to begin the homebuying process.

>>See: Is Now a Good Time to Buy a House?

Budgeting for your first home: How much can you afford?

5. How much money do I need to buy a house?

Most homebuyers will need to think ahead about the following costs when estimating how much money is needed to purchase a home:

• Down payment: The down payment is a percentage of the home’s purchase price, anywhere from 0% to 20% depending on your loan. For example, a 10% down payment on a $500,000 home would be $50,000.
• Closing costs: Typically 2-5% of the home’s purchase price. It covers a variety of fees like lender and title fees, property taxes, home inspection, and homeowners insurance, to name a few. 
• Moving expenses: These can include hiring movers, transportation, and purchasing packing supplies.
• Emergency fund: It’s wise to have 3-6 months’ worth of living expenses for unexpected costs.
• Ongoing costs: Beyond your mortgage payment, be prepared for ongoing expenses such as property taxes, utilities, maintenance, and homeowners insurance.

6. How much house can I afford?

On the same topic, it’s important to know how much house you can afford. You can estimate affordability with your current income and down payment. Make sure to also account for closing costs, insurance, and additional fees.

You’ll also want to consider your debt-to-income (DTI) ratio, which is a primary concern for lenders. This measures your debt payments each month in relation to your gross monthly income. While some lenders allow a DTI up to 43% or higher, they typically follow the 28/36 rule: You should allocate no more than 28% of your monthly income on housing, and no more than 36% on debt payments.

>> Discover: What Percentage of Your Income Should Go Toward Your Mortgage?

7. What credit score is needed to buy a home?

While it’s beneficial to have a great credit score, there are loans that cater to buyers with lower ones. It’s important to note, however, that your credit score influences your interest rate and loan options. Here are the minimum credit scores needed to qualify for certain loans:

• Conventional loans: 620-660
• Jumbo loans: 700
• FHA loans: 500-580
• VA loans: no requirement
• USDA loans: typically 620, but can be lower

8. How much is a down payment on a house?

A common myth is that you need a 20% down payment in order to buy a house. While putting 20% down is beneficial, it’s not required. Several loan options, such as FHA or VA loans, only require a down payment of 3.5% or 5%. Keep in mind that there may be additional costs associated with a down payment under 20%, like paying for private mortgage insurance (PMI).

9. Can I buy a house with no down payment?

The short answer is yes. You can buy a home with no down payment. There are two loans available that allow you to buy a home with zero down: 

• VA loans offer no-down payment loans for active-duty service members, veterans, qualifying spouses, and current or past members of the National Guard or Reserve, and other beneficiaries who meet the criteria.
• USDA loans, backed by the U.S. Department of Agriculture, offer zero-down payment mortgages for qualifying homebuyers purchasing in specific rural or suburban areas.

If you don’t qualify for one of these programs, there are plenty of low-down payment loan options and down payment assistance programs.

10. What are the closing costs?

Closing costs encompass a variety of fees associated with finalizing a home purchase. These typically include:

• An appraisal fee to assess the home’s value
• Title fees for searches and insurance
• Lender fees for processing the loan

Other common expenses can include legal fees, recording fees, prepaid property taxes, or homeowner’s insurance. In general, closing costs range from 2% to 5% of the loan amount, though this can vary depending on the location and services required.

11. What are the ongoing costs of homeownership to consider?

Once you become a homeowner, there are a few recurring costs to keep in mind. Beyond your monthly mortgage payment, you’ll be responsible for property taxes, homeowner’s insurance, and HOA fees (if applicable). For everyday essentials, you’ll also need to budget for utilities, regular maintenance, and occasional repairs.

Finding the right mortgage: What’s the right choice for you?

12. What is the right type of mortgage for a first-time buyer?

With thousands of mortgage loan products available, it’s a good idea to shop around for your best fit as a first-time buyer. Your lender will likely have several options for you based on your credit score and the amount you want to borrow.

The most common types of mortgage loans are conventional, FHA, jumbo, VA, and USDA loans. Below is a table of these loans and what they offer:

13. How does the mortgage term affect the monthly payment?

The mortgage term directly affects your monthly payment by spreading the loan amount over a shorter or longer period. A shorter mortgage term will result in a higher monthly payment since you’ll be paying off the principal balance faster. However, you’ll pay significantly less interest over the life of the loan.

With a longer mortgage term, you’ll have a lower monthly payment because the principal is stretched over more years. This will be more affordable month-to-month, but you will pay significantly more interest over the life of the loan. 

14. What’s the difference between a 15 and 30-year mortgage?

With conventional mortgages, you’ll generally have the option of a 15 or 30-year mortgage. 

• A 15-year mortgage means you’ll pay off the loan in 15 years, but you’ll have higher monthly mortgage payments and a lower interest. 
• A 30-year mortgage allows you to pay off the mortgage over 30 years, which means you’ll have a lower monthly payment. However, you’ll pay more interest over the years.

For example, if you have a $300,000 loan at 6% interest, a 15-year mortgage would have a monthly payment of around $2,532 with $159,760 in total interest. In contrast, a 30-year term would be about $1799 per month, but cost about $347,756 in total interest.

15. What’s the difference between a fixed-rate mortgage and adjustable-rate mortgage?

When choosing a mortgage, you’ll need to decide between a fixed-rate mortgage or an adjustable-rate mortgage (ARM). Here’s what you need to know about each:

• Fixed-rate mortgage: The interest rate remains constant throughout the entire loan term. Your mortgage rate will not change, regardless of market rates rising or falling. 
• Adjustable-rate mortgages (ARM): The interest rate changes at specified intervals during your loan. For instance, a 30-year loan with a 5/1 ARM means you’ll pay a fixed rate for the first 5 years, but after that, your interest rate will change every year for the remainder of the loan. It’s important to note that with an ARM, your rate could increase or decrease.

A fixed-rate mortgage is often best if you plan to stay in your home long term and want predictable payments. An ARM may make sense if you anticipate moving or refinancing within a few years and wish for a lower initial rate.

16. How do I get the best mortgage rates?

Scoring a great mortgage rate can save you thousands over the life of your loan. Here are some tried-and-true ways to get the best rate possible:

1. Shop around: Compare offers from multiple lenders to find the best rate and terms.
2. Consider different loan types: Explore your options like fixed-rate, adjustable-rate, FHA, and VA loans to find your best fit. 
3. Boost your credit score: A higher credit score shows lenders you’re a low-risk borrower, which often leads to better rates.
4. Increase your down payment: The more you can put down upfront, the lower the risk for the lender.
5. Lower your debt-to-income ratio: Paying down existing debt can improve your financial profile, helping you qualify for lower interest rates.
6. Lock in rates: Once you’ve found a good rate, lock it in to protect yourself from market fluctuations.

17. Should I get pre-qualified or pre-approved for a mortgage?

If you’re considering buying a home, you’ve likely heard of getting pre-qualified or pre-approved. These terms are often used interchangeably, but carry different meanings.

• Pre-qualification: An informal lender evaluation of your finances, estimating affordability. Useful for early homebuyers to assess if financial improvements or higher down payment savings are needed.
• Pre-approval: An official document from a mortgage lender detailing the loan amount they’ll offer for a home purchase. Lenders determine this amount by assessing income, assets, debts, and credit history. It’s highly recommended for serious homebuyers, especially in competitive markets.

>> Read: Pre-qualified vs. Pre-approved: What’s the Difference?

18. What documents do I need to get a mortgage?

While the exact list may vary slightly by lender and loan type, you’ll typically need to provide the following documents:

• Proof of identity: Valid photo ID (such as a driver’s license or passport) and social security card
• Income and employment: Recent pay stub, W-2 forms, tax returns, profit and loss statements (if self-employed), and proof of other income (i.e. social security or pension)
• Asset statements: Bank statements, investment account statements, or retirement account statements
• Debt: Documentation of existing debt (such as student loans and credit cards)
• Additional documentation (if applicable): Gift letter (if someone is helping with your down payment), rental history, or divorce decrees

The homebuying process: Steps to expect along the way

19. What happens during the homebuying process?

The homebuying process involves several steps but can differ slightly depending on whether you buy a home with a mortgage or with all cash. To put it simply, these are the steps:

• Get pre-approved for a mortgage: Apply with multiple lenders to compare loan terms and select one for your mortgage.
• Find a real estate agent: Search for a trusted agent who understands the local housing market, can answer your questions, and can help you make a competitive offer when you’ve found the right home.
• Start your search and tour homes: Define your priorities, explore listings, and start touring homes.
• Make an offer: Once you’ve found a home that meets your needs, you’ll want to make an offer quickly. Your agent will help you draft a formal offer letter that includes your name, address, price, any contingencies, earnest money deposit, and a deadline for them to respond.
• Secure your mortgage: After your offer is accepted and you have the purchase agreement, you will need to apply for a mortgage. Remember, a pre-approval isn’t the same as officially getting a mortgage.
• Underwriting: After you apply for a mortgage, the lender will assess your finances and application to determine your eligibility for a loan.
• Have a home inspection: A home inspector will walk through the property and report any issues. Afterwards, you can negotiate with the seller to cover repair costs for any major problems.
• Prepare for closing: Review your closing disclosure (provided by your lender) for errors and prepare funds for closing costs. Schedule a final walkthrough of the property. On closing day, bring your ID, proof of funds, and the closing disclosure.
• Get the keys: Once the funds have been exchanged and all documents signed, the title will be in your name. You can usually expect to get the keys to the home after 5 p.m. on the closing date.

Read>>Homebuying Process Timeline: 17 Steps Every Buyer Should Know

20. How long does the homebuying process typically take?

The homebuying process can vary, but in general, it takes about six months from start to finish.

21. Do I need a real estate agent?

Working with a real estate agent is highly recommended for first-time homebuyers. An agent will be your advocate and guide you through each step of the homebuying process. With expert knowledge of the local market, access to a wider range of listings, skillful negotiation on your behalf, and assistance with paperwork and closing procedures, they can give your peace of mind throughout the homebuying journey.

22. What are some common first-time homebuyer mistakes to avoid?

• Avoid overspending by sticking to your budget and factoring in all associated costs like closing costs, property taxes, and insurance.
• Don’t neglect maintenance and perform regular upkeep to avoid costly repairs down the line.
• Build an emergency fund for unexpected home costs or income changes. Aim to save for at least 3-6 months of living expenses.
• Don’t skip the home inspection to uncover hidden issues before you buy.
• Research the neighborhood by looking at schools, crime rates, amenities, and future development plans.
• Understand the mortgage process by researching different loan types, interest rates, and terms before committing.
• Consider hidden costs of home buying including property taxes, homeowner’s insurance, HOA fees, and potential utility increases.
• Don’t make emotional decisions by remaining objective and not letting emotions cloud your judgment.

>> Read: 17 First-Time Homebuyer Mistakes to Consider and How to Avoid Them

Life as a homeowner: What comes next?

23. What should I do right after closing on my new home?

After closing on your new home, make sure to change the locks, transfer utilities, update your address, and set up your security system right away.

>>See: 16 Things to Do Immediately After Buying a Home

Final thoughts: First-time homebuyer questions

The homebuying process can feel like a whirlwind, especially when it’s your first time. With the right knowledge (and a little patience), you can simplify your experience and enjoy every step of the way. Don’t be afraid to lean on your real estate agent for guidance and support. Just make sure to keep calm, ask questions as they arise, and have fun finding a place to call home. 

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