Many of my clients over the last several years have been first time home buyers. Below I have compiled frequently asked questions along with answers. I hope that this brief FAQ will help other people begin their Austin home search and ultimately purchase their first home in Austin.
Q: I’m thinking about buying a home, what is the first step?
A: The first step is talking to a lender and getting pre-approved for a mortgage. This is an important first step because it helps you figure out exactly what how much home you can comfortably afford. Lenders can also paint a clear picture for what your monthly payments will be at different loan amounts. Lenders are also credit experts so they can usually recommend a few easy things to improve your credit and help you get the best interest rate possible. If you do not have a lender, we can definitely recommend one for you.
Q: I would like buy a home because I hear it is a great time, but I don’t have a large down payment?
A: Conventional loans only require 5% down on for most properties and FHA loans still only require 3.5% down. On a a $200,000 home that is only $7,000! There will be additional closing costs, but it is often possible to to get the seller to contribute towards those fees. Depending on your personal financial details and the specific property, there are also still some down payment assistance programs available as well. You can also receive a tax free gift from a parent or close relative up to $13,000 per relative without tax consequences.
Q: What is the option fee/option period and when will I need it?
A: The option fee is due at the time you go under contract along with the earnest money. The option fee is usually $100-$200 paid directly to the seller for the option period. The option period is usually 7 to 10 days during which time the buyer can terminate the contract for any reason and have their earnest money refunded. The primary purpose of the option period is to perform due diligence including having the property inspected negotiating any critical repairs. The option fee is usually credited to your down payment at closing.
Q: What is earnest money when will I need it?
A: Earnest money is also due at the time you go under contract. Essentially it is a good faith deposit which also provides the buyer incentive to move forward with the purchase after the option period is over. The standard amount for earnest in Texas is 1% of the purchase price. Earnest money is credited towards your down payment at closing.
Q: When will I need the down payment?
A: You will need the down payment and any additional closing costs not paid by the seller by the closing date specified in your contract. Once you have a property under contract, you can get a good faith estimate from your lender which will give you a good idea of how much money you will need to bring to the table.
Q: Are there any other costs or fees, which I should be prepared for?
A: Yes. It is highly recommended to have the home inspected by a licensed Real Estate Inspector. The cost of the inspection may vary based on the property size, type, and age, but can also vary from inspector to inspector. For most first time buyers, $350 to $500 should be plenty to budget for an inspection, but larger or older homes could require up to $600 or more. Additional inspections for specific items(electrical, plumbing, HVAC, etc) may be subject to a service all fee as well.
Q: After we get a property under contract, how long until I will be able to move in?
A: You can usually plan on 30 to 45 days from the date you go under contract to the date you will purchase and close on the home. Depending on the seller’s situation and the current market, the sellers may negotiate a leaseback where they occupy the home for a week or more after closing. However, it is more common for buyers to take possession of the home on closing day.
Q: Ok, I’m ready and I’m pre-approved, what now?
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