After helping many first-time-homebuyers find their first home (and having been one myself many years ago) I know there are lots of questions you'll have about the process…
I’ve assembled all of my clients' most frequently asked questions here on this page for your convenience. But if there’s something else you want to know (but you don’t see it here) just click the ‘ask a question’ link below, and I’ll do my best to answer it for you! And hopefully add your questions to this page too!
There is a lot of information to know about buying your first home, (that’s why we Realtors have jobs) so don’t hesitate to ask – even if you’ve asked it before and just forgot the answer.
Feel Free to Text or Phone: 612-644-5380 – or Click Here to Ask A Question
To Your Success,
~ Alex Anderson
Minnesota First Time Home Buying Specialist
How hard is it to buy a house?
It’s actually not as hard as most people think. As long as you have a good lender and a good agent working for you, they take care of all the paperwork & legal mumbo-jumbo as needed. These professionals are trained in what’s needed as well as how to protect you from costly mistakes and will help guide you through all the choices you’ll need to make.
The only area you may run into trouble is if you are attempting to buy a bank property. Then be prepared for unanswered questions, closing dates moving a dozen times and difficult communications between all parties. (read more on bank property question)
What first time homebuyers specials are available?
There are several different programs in MN that can provide money for your down payment and closing costs, monthly assistance, even lower your interest rates. For specific numbers and the names of the programs, visit my 1st Time Homebuyers Programs page. Then talk to your lender to decide which program is best for you.
How do I know if I’m a 1st time homebuyer?
If you haven’t had ownership of any real estate in the last 3 years, you are considered a First Time Homebuyer. This information will be verified by checking your tax records.
What do I need to qualify for the First Time Homebuyer Programs?
Besides not owning any real estate in the last 3 years, you will still need to qualify for the 1st Time Homebuyer program that’s right for you. Again, you will want to sit down with your lender and go over which is most appropriate because each program is a little different, but some of the basics may include: home must be owner occupied, you must have acceptable credit, you must be within pre-set income limits and the home you want must be within pre-determined price levels.
I see a home I like on the MLS, how do I go see it?
There are 2 ways to see a home on the MLS:
1) wait for your listing to have an open house. Any scheduled open houses will be listed on the MN MLS. Go there during that time – you may be asked to sign in.
2) Have an agent let you in. Schedule a ‘showing’ at your leisure. If you have multiple properties to view, let your agent know and they can line them up to see several at your preferred date & time. If you don’t yet have an agent, contact me – I’m happy to show you homes.
How much does it cost to have a Realtor?
If you are buying a home, it doesn’t actually cost you a thing! Realtors are paid from the seller’s commission.
How do Realtors get paid?
When someone is selling their home, they have negotiated a commission paid to the selling agent (usually 6% – 8%). Part of that goes to the buyers (your) agent (usually 2.5 to 3%) after the sale is completed.
What is the benefit of having a Realtor?
Having your own Realtor is much like having your own attorney. They negotiate on your behalf often saving you thousands of dollars, they legally represent you through the process to get you the best deal possible, they make recommendations to keep you safe (like getting an inspection), and do all the paperwork on your behalf to keep you out of court in the future and prevent any future mis-haps with things like your ownership, personal property, rights and title.
Realtors can also put you in touch with great mortgage lenders while saving you time and trouble by making sure you’ve considered every detail of the transaction and steer you clear of any hazards or drawbacks that might come up.
Did you know? When you sign a contract with your Realtor he/she is bound by law to work on your behalf!
How do I find a good lender?
Some people have friends or relatives that are either in the biz or would recommend someone they’ve worked with and liked. Otherwise every good Realtor has lenders they’ve worked with in the past who’ve done well, know their stuff and specialize in your particular needs, whatever they may be
How do lenders get paid?
Lenders get paid after (and only after) you close a loan with them. The amount varies by the loan you choose. It is normal to see ‘1 point’ (1 percentage point) paid up front, but sometimes there are desk fees or other fees on the back end that they collect too, especially if you’re “buying down” your interest rate, or have some other special loan.
What information will the lender need?
Typically a lender will start with your social security number and run your credit report. This will give them your credit score and some history. They will then also need to know what your annual income is, any additional incomes and savings you may have, then some basic personal information like marital status, how many dependants, employer information and contact information.
Once you have a specific property in mind, your lender will also need to know the basics about the property including the address and what earnest money you have sent. They will then also want to know how much you’re offering, how much money you’d like to put down on it, when you’d prefer to close, and if this home would be your primary residence.
The lender will also ask you for documentation verifying this info as well as many other questions. But don’t be put off, they need this information to do their job and find you the best loan for your circumstances
How soon should I start looking?
Ideally I recommend starting 3 (or more) months in advance to when you would prefer to close on your new home.
Most homes close 30-45 days from the date when an agreement is accepted (that is when the Purchase Agreement has both buyers AND sellers signatures). And most people need at least one month to shop the market, see what’s out there and pick from what they find. There is also the period of time after submitting an offer that it will be considered, and possibly some counter offering going on.
What neighborhoods should I look at?
Mostly it is wise to shop for a home near the areas that you will be working, playing and shopping to save on travel time as well as gas expenses. If you have (or are planning to have) children, school systems will also play a roll. However there is no rule to that effect. I have one client that chose a cabin-like setting for their home requiring them to commute 2 hours each way in order to live where they live.
If appreciation is a consideration, affluent areas often appreciate at higher rates than low-income areas and having the smallest house on the block is also a way to create value with any improvements you do.
But mostly, First Time Homebuyers prefer to start in the areas of town they are already familiar with and like.
How much can I afford?
There is not one simple answer for this question. The quickest and easiest way to find out is to contact your favorite lender to ‘run numbers’ for you. Contact me if you’d like some recommended lenders that specialize in 1st time buyers.
How much are closing costs?
This too, is a number that varies greatly with the location of the property (city/county related fees) and the type of loan you choose. But here are some regular closing costs you can expect to see on your HUD at the closing table:
Closing fee: $195 – $700
Title Evidence/search/abstracting fee: $180 – $500
Title Examination Fee: $125 – $160
Owners Policy of Title insurance: no more than $4.00 per $1000.00 of purchase price
Mortgage Policy of Title insurance: no more than $3.00 per $1000.00 of purchase price
Miscellaneous Title fee: $0.00 – $500.00
State Mortgage Registration Tax: (depends on county) no $2.40 per $1000.00 of mortgage amount
State Deed Tax: (depends on county) no $3.40 per $1000.00 of mortgage amount
Miscellaneous County Fee: $0.00 – $200.00
Escrow of Taxes: equivalent of 6 months taxes (see tax records)
Escrow of Insurance: equivalent of 6 months premiums (see insurance agent)
Real Estate team fees: $175.00 – $300.00
Broker fees: $350.00 – $500.00
Plat Drawing: $50.00 – $100.00
Name Search: $30.00 – $50.00
Document Handling fee: $50.00 – $100.00
Recording Services fee: $50.00 – $100.00
This is not all the fees you will see, nor will you likely incur all of these fees, but rather a taste of what you might see.
What is earnest money and how is it different from the down payment?
Earnest money is the check you send along with your offer to say how ‘earnest’ you are about the offer. The more you really want the place, the more it is prudent to send a big earnest check. This money is still yours, it’s just held in a escrow account until the day you close.
Down payment amount will be determined with your lender, for example if you choose a loan that requires 10% down.
You can use your earnest money toward your down payment (or closing costs, pre-paids or whatever you prefer), but that is also yours to choose.
How much earnest money should I put down?
This will depend somewhat on the property you choose: less expensive properties would necessitate lower earnest money checks. $500 – $1000 would be about the lowest amount of earnest money you’d want to put down, but up to 5% or more of the offer amount is appropriate – more if you’re very ‘earnest’ about your offer.
How much down payment is necessary?
This will be determined by the loan you and your lender choose for you. It could be 3%, 5%, 10% of the price of they property, or higher if that’s the residential loan you prefer. There are still 0% down loan programs available too, just ask your lender if you are eligible & this program might be right for you.
Where do I get my down payment money?
Many first time homebuyers have to be somewhat creative to gather their down payment. If you don’t have that type of money in savings, it is common to ask for family assistance (gift money) or look at any retirement funds, 401Ks or other lump sums that you may have laying around. This is another area where your lender can help examine your total picture and make some recommendations.
How do I know if my credit is good enough?
You can make a pretty accurate guess based on what you know about yourself:
Do you pay your bills on time?
Do you have a lot of housing-related debt vs. you regular income?
Do you have a lot of total debt vs. you total income?
Are your credit cards mostly full?
Items like this can indicate how you typically manage your money and how much of a risk you might be to a bank to lend you money. For the most accurate assessment, just visit your favorite lender. They can gather enough information on you to assess this with about a 5 minute phone call, if you don’t want to take the time to meet with someone.
What if I can’t find the ‘perfect’ place?
This one make me smile. 🙂 Sometimes a new buyer will have the expectation that they will look at homes and look at more homes, then one day the sun shines down, the heavens open up and the bells start chiming…. chiiiiiiing… THE ONE! And although that can happen once in a while, it’s not how it normally goes down.
Here’s how it usually goes: we look at 10, 20 or 30 places. As we go through this process, you narrow your criteria and hone in your preferences. We re-visit a couple previously viewed along with a few more new ones, maybe even go for one last showing on a couple favorites, then sit down and make an offer on one of our finalists.
How long does it take to close on a house?
Once your offer is accepted by the seller, most lenders are able to close in approximately 30 – 45 days. Some lenders can do it more quickly, if needed for some reason. Or if there are some kind of paperwork holdups could take longer (this is very common with bank properties).
How do I make sure I get an inspection?
It’s actually a part of the offer – we say that the offer is ‘contingent’ on an inspection. That means no inspection, no deal. That way, based on whatever the inspector turns up, you can change your mind if needed.
How much does an inspection cost?
For an average sized single family home, I expect to pay $350 – $400 or so for an experienced and thorough inspector. You can probably find one for less, but I’m not a fan of penny pinching on something as important as the person writing a full report on my future home.
How important is an inspection?
I get inspections on each and every home I buy. I recommend them for everyone’s purchase. I think it’s a prudent piece of information to have and a tool for making sure you’re "buying what you think you’re buying". I recommend hiring a professional and getting it done – if it turned up any surprises, it’ll be well worth it.
What if I’m not okay with what’s on the inspection?
If your inspection comes back and you’re very disappointed with the results you have 2 choices: cancel the offer or adjust your offer amount. If you adjust your offer amount you do risk losing the property.
Keep in mind there will be lots of items on the inspection report – that’s the inspectors job, even if the house was just built this year. Be prepared for a long list and consider what’s a minor fix that you’re willing to deal with and what is a major deal-breaker.
Can I bring my parent/friend to see house before I make an offer?
Absolutely! Once you’ve found the one or have a couple finalists to choose between, sometimes it is very helpful to bring a parent, partner or friend to give their opinion. After all, they know your lifestyle, tendencies and tastes well.
Can I get more photos than what’s on the MLS?
Usually all the photos on the MLS are ALL the photos that are available. If you read all about the property and still want to know more I recommend asking your agent those questions or just scheduling a showing and going to see it. Best to see it during the day too, so you can see the exterior details of the home well.
How do I know how much to offer?
There are many theories on this. Some people like to chance it and lowball. I’m more a fan of if you find what you want, offer a fair price and begin legitimate negotiations. When I find something I really want, and I’m actually committed to getting it, I offer no more than 2-3% variance – 5% if I’m not so sure.
What are good things to look for in a 1st home?
If you’ve never cared for a home before, you may consider a home that doesn’t need a lot of work. If you’re handy that’s a different story. I recommend that are convenient to your lifestyle (school, church, family, work, etc.). And if your finances are tapped out from your down payment and closing costs, a home with no major issues on the inspection (like a new roof). After that, the details really come down to your own personal preferences.
What is an ‘association fee’?
When purchasing a condominium or town home (or single family home in an association) where there are shared utilities (sewer, trash, water, recycling, cable, etc.) or shared facilities (party room, pool, parking lot, playground, hallways, etc.), there will be an association fee, or HOA (Home Owners Association). Usually it’s charged monthly – sometimes quarterly or annually – and includes whatever utilities and facilities are shared – maintenance, charges and upkeep. Usually HOAs are padded for future projects.
For example, if a condo building foresees replacing the roof on the building in 5 years & they know it will cost $20,000, the HOAs include enough padding to buy that without charging residences any extra money at that time. When you live in one of these communities, as an owner, you also have access to ALL financials if you want to know what’s currently on the budget.
What do association fees cover?
It’s different for every community and/or building. Your Realtor can tell you the basics from the MLS listing. You’ll need to review the ‘condo docs’ to see all the detailed particulars for that specific community.
How do I know if pets are allowed?
Your Realtor will have access to that information for you on the MLS.
What’s the difference between a condo and a town home?
Condominiums are residences stacked on top of each other as well as side by side. They can be high rises (4 stories or more) or low rises (3 stories or less). Town homes are attached side by side (typically not on top of each other) and are sometimes referred to as a terraced or row house. Residents of condos and town homes own the between the walls and share ownership in the common areas.
What about “rent to own”?
Long story short, renting to own is a little dangerous. Less than 10% of renters in this situation can actually get financing at the end of the lease term. When that happens you lose the deposit you put down (typically at least $5000) and any extra monthly you have been putting towards your purchase. All that money kept in your pocket for that period of time would’ve made a great down payment on something.
Some websites have “featured listings”, why are they special?
Those are homes being sold by the company whose website you are on. If they are selling that home for the owner and find a buyer and represents them too (called a ‘dual agent’) they get both sides of the commission (seller commission and buyer commission).
What if I’m not the only person with an offer on that house?
That’s called a ‘multiple offer’ situation, when more than one person at a time has an offer on the same house. When this happens there is no way to know what the other person offered and we simply submit your ‘highest and best’ offer, then wait to hear which the seller has chosen.
What will utilities cost?
Given all the different types of furnaces, water heaters, stoves and other appliances, as well as different levels of efficiency of homes and different sizes (not to mention usage varies from owner to owner) it’s really tough to ballpark.
One way to get historic numbers though, is call the local utility companies that operate in the area you’re shopping, tell them you’re considering buying this house, give them the address and often (not always) they can tell you what the bills have been in the past. As far as usage is concerned, you can also look at what your bills have been where you are currently living as a point of reference.
How can I find out what school district I’m in?
Your Realtor can tell you what school district you are in or, to see any district in MN go to the Minnesota site: http://www.mnplan.state.mn.us/maps/SchoolDistricts
How can I find out what bus routes I’m near?
Metro Transit has a great interactive map you can find all bus routes going to or near your potential new home. Here’s their website – it’ll take you directly to the map page – just choose which map you’d like to see. http://www.metrotransit.org/serviceInfo/mapSystem.asp
What about buying foreclosures?
Certainly there are a lot of them out there right now and the prices are good. There is one thing I tell all my clients to keep in mind is that you will save money buying these, but you will pay more in time, paperwork and frustration. As long as that is acceptable and they are ready for a roller coaster ride, then by all means let’s look at foreclosures.
Just one example of a personal experience I use to show the ‘frustration’ part: I had a client who put in an offer on a foreclosure, a town home in the northern metro. We had to wait 6 months just to hear back from the bank with a yes, no, or counter offer. When we did finally hear back, they simply declined the offer and took the place off the market. Sheesh!
Call or Text Alex Anderson at: 612-644-5380 – or Click Here to Ask A Question