Frequently Asked Questions About Buying a Home

Should I buy or rent a home?

This is a frequently asked question, especially for the first-time home buyer.  Everyone’s circumstance is unique, but you should think of a home purchase as an investment.  When you rent a property, your monthly check goes toward the landlord’s equity.  That money is potentially building wealth for someone else.  When you own your own home, you are building your own equity.  You should also consider that when you do own your own home, you can deduct the cost of your mortgage loan interest from your federal income taxes.

How much home can I afford?

You will want to talk with a reputable lender to find out how much home you can afford in today’s real estate market.  Generally, a lender will use two guidelines for determining the amount.

1)      A standard rule is that your monthly housing payment (principal, interest, taxes, and insurance) should not take up more than 28 percent of your income before taxes – the front-end ratio.

2)      Lenders prefer that all your other debt commitments, including car payments, minimum credit card payments, student loan payments, and your house payment, calculate to 36 percent of less – the back-end ratio.

However, these ratios are for the typical conventional mortgage.  A lender will be able to give you details of other types of mortgages including FHA and VA loans which will have more flexible qualification standards.

What is the difference between getting pre-qualified and pre-approved for a mortgage?

There is a big difference between the two and as a potential home buyer, it is important to understand the difference.  Getting pre-qualified for a mortgage loan is fairly simple and the first step in the loan process.  You supply the lender with some basic financial information (income, debt, assets).  After evaluating the information, the lender can pre-qualify you for how much mortgage you can afford.  This step does not include an in-depth look at your ability to purchase a home

On the other hand, getting pre-approved for a mortgage loan is much more detailed.  You’ll complete an official mortgage application and supply the lender with necessary documentation.  Your lender will check on your ability to purchase a home by looking into your financial background in much more detail.  Your lender will then give you a set amount that you are approved for.  You will look like a much stronger buyer with a pre-approval letter as opposed to a pre-qualification letter when submitting offers.

What happens if the house is located in a flood plain?

If a property is located in a flood plain, you may be required to carry flood insurance which can affect the cost of living in the house.  Your REALTOR® or lender will let you know if the home is located in a flood plain but you can also double check FEMA’s online maps by county.  If it is located in a flood plain you need to know what type because some ratings indicate higher risks than others.  Ask your insurance agent for a flood insurance quote and weigh your options once you have all of the information.

Why should I use a REALTOR® to represent me when buying a home?

A home seller’s REALTOR® represents the seller’s best interests.  When you are the home buyer, it is essential that you are also represented in the transaction and that you have someone looking out for your best interests.  Our REALTORS® at TCP Real Estate will represent you and your interests in finding the perfect property and making sure you have a smooth transaction from start to finish.  And as a home buyer, you pay ZERO for this representation.  Our services as your buyer agent is FREE to you, as the seller pays all commission costs.  Contact us today to get started on your customized home search.