Common Mortgage Questions Answered
Buying a home will most likely be the largest purchase of your life, so you want to make sure you know what you’re doing so that you still have some money in your wallet. The national median price of a single family home for the third quarter of 2014 is $217,300. Depending on where you are buying, that could buy you anything from a small condo to a reasonably large sized home. Either way, it’s a lot of money.
So what key information should you know about buying a home? Below are four questions that the average first time homebuyer will ask.
The first step is contacting a real estate agent, right?
No. Before you find a real estate agent, you need to check your credit score. You are able to get a free credit score once a year. Your credit score will be used to determine your mortgage rate which could mean you pay more or less on your monthly payment. Once you get your credit figured out, you should contact a mortgage loan officer to get preapproved before finding a real estate agent.
Which is higher, APR or interest rate? Are they the same thing?
APR and interest rates are different. APR is an abbreviation for Annual Percentage Rate. This usually includes some of the fees related to buying a house, including broker fees and mortgage insurance. Interest rate is the percentage of interest you pay for your loan. This rate doesn’t factor into any fees or other costs like APR. Because of that, the APR will usually be higher than your mortgage interest rate.
Should every home be inspected by a professional before closing?
Definitely. You always want to pay a professional to inspect the home you’re buying. You can even make your offer dependent on the results of the inspection and negotiate any needed repairs. You may have to get a separate inspection for wells, septic systems and termites. A home inspection will usually cost a couple hundred dollars, but it’s better than spending hundreds of thousands of dollars for a home that might fall apart.
A typical inspection will look at the following:
Attic and visible insulation
Walls, ceilings, floors, windows and doors
Foundation and structural components
If I’m planning to stay put for at least two years, would it make more sense to buy then rent?
Not necessarily. Two years most likely isn’t long enough to earn your fees and moving costs. You generally shouldn’t consider buying a home unless you plan to stay for at least five years. Any amount of time less than that will risk you losing money on the deal.